Thursday, June 19, 2014

Proposed Michigan Bills Seek to Change Garnishment Process

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The Michigan legislature is considering bills to amend its creditor garnishment process. In early June, the legislature held a hearing on two companion bills, House Bill 5390 and 5391. There are important elements to the companion bills that would drastically change Michigan’s current process in handling garnishments.

House Bill 5390 would change the duration of the garnishment order. Currently, garnishment orders expire after 182 days. After this time a creditor must obtain a new order from the courts to continue paying off the same debt. House Bill 5390 would make the garnishment continuous so that it runs until it is paid off or released by the creditor.

House Bill 5390 would also provide a penalty reform. Current Michigan law allows the employer to be held responsible for the entirety of the employee’s debt if the employer mishandles the withholding. The new bill would place a cap on the amount that can be charged against the employer. That cap is the greater of $100 or the amount that should have been withheld over a period of 100 days. The penalty reform also requires the creditor to notify the employer of any errors in the withholding so that the employer can correct them.

Companion House Bill 5391 provides yet more relief for employers. If an employer fails to withhold for 60 days the employer could be ordered to pay the money owed to the creditor at once. That payment will include amounts that were owed by the employee. House Bill 5391 will allow the employer to recover those amounts from the employee. The employer does not need the employee’s consent, but the withholding cannot bring the employee’s pay below minimum wage or exceed 15%.

APA member Martin Brook—an attorney with Ogletree Deakins in Michigan—testified at the hearing for the proposed bills. The APA also submitted written testimony in favor of the bills arguing that they would strike an appropriate balance between the needs of employers that process garnishments and creditors who rely on the garnishment process to collect outstanding debts. The bill is still making its way through the legislature.

Check your inbox for PayState Update Volume 16, Issue #13 for more on these Michigan bills.