COLLECTIONS

General

A plaintiff in a civil action (including small claims and landlord-tenant proceedings) who obtains a money judgment is not necessarily assured of being paid. If the defendant does not voluntarily pay (or enter into an acceptable installment payment plan), the plaintiff will need to exercise their judicial enforcement remedies: debtor’s exam, garnishment, attachment, and/or judgment lien. Each of these proceedings is particularly governed by state statutes and court rules (and will require payment of filing and service fees). Only a general overview is provided here.

Debtor’s Exam / Discovery Subpoena

Since a plaintiff rarely has sufficient information about the defendant to effectuate enforcement of the judgment (i.e. social security number, place of employment, place of banking, etc.), the plaintiff may apply for a “discovery” subpoena (Form MC 11). The discovery subpoena is then served on the defendant requiring that person to appear in court and complete an Affidavit of Judgment Debtor (Form DC 87) and/or be examined (under oath) regarding their income, assets and liabilities.

Garnishment

Garnishment is the act of taking and applying an obligation (or other personal property) held by another and owed to the defendant. The types of garnishment are divided into two general types: periodic (e.g. salary/wages or any other stream of income due the defendant,) and non-periodic (e.g. bank accounts, income tax refunds, and profit sharing dividends). A periodic writ of garnishment (Form MC 12) attaches to income payable to the defendant for 91 days; while a non-periodic garnishment (Form MC 13 / Form MC 52) attaches to the obligation due at the time it is served on the garnishee.

Several types of income are exempt from garnishment, including social security, aid to families with dependent children, general assistance, unemployment compensation, and workers’ compensation benefits.

Federal law (15 USC 1671 et seq.) restricts garnishment of earnings (including payments pursuant to a pension or retirement program) to 25% of disposable earnings per week (or, thirty times the federal minimum wage, whichever is less).

Attachment

Sometimes called (writ of) “execution”, an Order to Seize Property (Form MC 19) authorizes the sheriff or court officer to seize and sell the defendant’s personal property (or, in the absence of personal property, the defendant’s real property) to satisfy the amount of the judgment.

State law (MCL 600.6023) exempts several types of property from execution, including household goods, personal clothing, tools necessary to carry on occupation, and homestead.

Judgment Lien

State law (MCL 600.2801 et seq.) allows judgment creditors (not including small claims) to place a lien their debtor’s interest in Michigan real property by recording a Notice of Judgment Lien (Form MC 94) with the appropriate Register of Deeds. A recorded lien immediately attaches to the judgment debtor’s then-existing and/or after-acquired interest in land in that county (although it does not attach to property held as tenants by the entirety, unless the underlying judgment is against both husband and wife).

However, unlike a consensual mortgage, there is no right to foreclose this statutory lien. Rather, its benefit is realized only upon the debtor’s sale or refinancing of the liened property; and, then, its grasp is limited to the debtor’s net equity in the affected property (after satisfaction of senior mortgages/liens, taxes, and closing costs).

The judgment lien is good until the earlier of (1) expiration of the underlying judgment, (2) expiration of 5 years after recordation (unless re-recorded), or (3) recordation of an authorized discharge or satisfaction.

Interest Rates

The rate of interest that accrues on a money judgment is controlled by state statute (MCL 600.6013). On judgment debts that do not involve a written instrument (e.g. promissory note / installment contract), the rate of interest equals 1% over the average interest rate for 5-year United States treasury notes during the 6 months preceding July 1 and January 1 (see SBM Money Judgment Interest Rates, http://courts.michigan.gov/scao/resources/other/interest.pdf ). Otherwise, the rate in the written instrument controls, but not exceeding 13% per year compounded annually.