If you have an unpaid bill, a creditor or collection agency might threaten garnishment. Garnishment is a legal procedure to take your money, for example from your bank account or your wages. However, garnishment is not allowed until a court has determined that you owe the money. A creditor can not garnish any of your income until it first sues you and gets a court judgment. Then it is called a judgment creditor.

If you owe money to a bank or credit union, e.g. on a loan, it may take money out of your accounts without a court order or prior notice to you. This is called a set-off. Federal benefits such as Social Security can be set-off (the amount of your check reduced) for child support or alimony obligations and for debts owed to the federal government such as back taxes and student loans.

Anyone who holds your money can be garnished to satisfy an unpaid court judgment. Common sources include: bank and credit union accounts, wages due from your employer, tax returns or credits due from the state of Michigan, and life insurance cash surrender value.

Some types of income such as Social Security are exempt from garnishment, but the burden is on you to prove the exemption. For example, suppose you owe a court judgment and your Social Security is deposited in a bank account. The judgment creditor can send your bank a notice that it wants your account garnished. The bank then notifies you of the garnishment attempt. You are given 14 days to file objections with the court. The court has a form # MC-49 for this purpose. A hearing is scheduled after you file the form. If you prove that the money in your account is exempt Social Security, then the court will not allow the garnishment to continue. When income other than Social Security is also in the account some judges allow garnishment of the entire amount.

If you are employed, a judgment creditor may attempt to garnish your wages. A form is sent to your employer to compute the amount available for garnishment. By federal law, at least $154.50 per week is exempt from garnishment. If you make more than that, up to 25% of your wages can be paid to the judgment creditor. If you think the amount of wages garnished is incorrect you can file objections as discussed in the previous paragraph.

There is a freeze on the money in an account while a garnishment attempt is pending. This means that you might not have access to your money for a number of weeks. To avoid this inconvenience, and to avoid having to prove to the court that your funds are exempt, consider having your checks sent direct to you rather than deposited in an account. After cashing your checks you would immediately pay your bills in cash or money orders so your income is not held up by a garnishment attempt. Be sure to get receipts if you use this method of payment.

Discussed below are some types of income that are exempt from garnishment. This is not a complete listing of garnishment exemptions. You should check with an attorney if you have questions about a specific type of income or asset.

Some income is exempt from garnishment both before and after it is paid to you. This includes Social Security, Supplemental Security (SSI), state welfare and Veteran’s benefits. Remember that federal benefits are subject to set-off for child support, alimony and debts owed to the federal government.

Certain types of income are exempt from garnishment before they are paid to you, including: unemployment compensation, workers’ compensation, state and federal civil service retirement benefits, and military retirement benefits. State law also exempts Individual Retirement Accounts (IRA’s) and life insurance payable to a spouse or child of the insured.

For most debts, pension benefits can not be garnished before they are paid to you. Once you receive the pension income it can be garnished, for example if you deposit it in a bank account. If you are aware of a threatened lawsuit or a court judgment against you, consider paying your bills in cash or money order as discussed above rather than depositing your pension check in an account where it could be garnished. For child support or divorce obligations, your pension benefit can be reduced before it is paid to you.

State of Michigan homestead property tax credits and tax refunds can be garnished by a judgment creditor and are subject to set-off to pay alimony, child support and debts owed to the state such as taxes. The state home heating credit can not be garnished or set-off.

Garnishment procedures vary from state to state. The above information is based on Michigan law and court rules.

If You Need Legal Advice or Representation:

To find legal aid programs that serve your area, visit the home page of this site, http://www.michiganlegalaid.org

If you wish to call a private attorney for representation, you can either look under "attorneys" in the yellow pages or contact the State Bar lawyer referral number at (800) 968- 0738.

Persons age 60 or older, regardless of their income, may be able to receive free advice from the Legal Hotline for Michigan Seniors by calling (800) 347-5297.

This article appears through the courtesy of Elder Law of Michigan and is ©2005 ELM, Inc.