If you owe debt and reside in Michigan, it's important to understand your rights and liabilities. It is even more important if a creditor threatens to file a lawsuit against you.
A lender, collection agent or law firm that owns a collection account is a creditor. Michigan law gives creditors several means of collecting delinquent debt. These methods include wage garnishment, account levy, and, in some cases, seizing personal property.
Before a creditor may use these legal tools in Michigan, the creditor must go to court to receive a judgment against you. See the Bills.com article Served Summons and Complaint to learn more about this process, and how to fight a lawsuit.
A court will hold a hearing after a creditor files a lawsuit. A hearing may result in a judgment awarded to the creditor. A judgment is a court's declaration the creditor has the legal right to demand:
The laws calls these remedies. A creditor granted a judgment is called a judgment-creditor. Which tool a judgment-creditor may use depends on the circumstances and Michigan law. We discuss each of these remedies below.
The most common method used by judgment-creditors to enforce judgments is wage garnishment. A judgment-creditor contacts your employer and requires the employer to deduct a certain portion of your wages each pay period and send the money to the creditor.
In Michigan, wage garnishment is allowed under Michigan Court Rule 3.101 (PDF). Michigan law permits earnings garnishment for child support and maintenance up to 25% of the debtor’s disposable income.
Once a Michigan judgment-creditor obtains a judgment, it must wait 21 days before it may ask the court for a Writ of Garnishment, which is asking the court for permission to demand a wage garnishment. During this 21 days, you are supposed to work out a payment plan with the judgment-creditor. If you pay within the 21 days, the judgment-creditor may not ask for a garnishment. If there’s no payment or payment plan agreement in 21 days, the judgment-creditor can send your employer, bank, or anyone who owes you money, a Writ of Garnishment. The parties that employ you, have your financial accounts, or owe you money are called garnishees. Garnishees have 14 days to send the court, the judgment-creditor, and you a Garnishee Disclosure that states what money each controls. Once a garnishee sends the disclosure, it must withhold funds from you and hold them for 28 days.
You can block or change a Michigan garnishment. For example, you can ask the court for a installment payment plan. When you receive a Writ of Garnishment, you have 14 days to file an Objection to Garnishment. Consult with a Michigan lawyer who has consumer law experience for assistance in filing an objection. If you cannot afford a lawyer, call your county bar association and ask for the names of the organizations that provide no-cost legal services to people with low or no income in your area. Make an appointment with one of the organizations, and bring all of the documents and letters you have regarding the debt to your meeting. The lawyer you meet will advise you accordingly.
If you reside in another state, see the Bills.com Wage Garnishment article to learn more.
A levy means that the creditor has the right to take whatever money is in a debtor’s account and apply the funds to the balance of the judgment. Again, the procedure for levying bank accounts, as well as what amount, if any, a debtor can claim as exempt from the levy, is governed by state law. Many states exempt certain amounts and certain types of funds from bank levies, so a debtor should review his or her state’s laws to find if a bank account can be levied. Some states call levy attachment or garnishment. Michigan is one of those states. See the Garnishment section above to learn Michigan’s general rules for levy/garnishment.
Not all funds in your bank/credit union are open to levy/garnishment. Money from the following sources may not be garnished:
If you have income from any of the above sources, do not co-mingle it with non-exempt sources. For example, if you receive unemployment benefits, and a $1,000 cash gift, do not deposit the gift into the same account where you are deposit your unemployment. Do not share a joint account with someone who may be subject to a judgment, because all funds in a joint account may be at risk for an account garnishment.
If you reside in another state, see the Bills.com Account Levy resource to learn more about the general rules for this remedy.
A lien is an encumbrance — a claim — on a property. For example, if the debtor owns a home, a creditor with a judgment has the right to place a lien on the home, meaning that if the debtor sells or refinances the home, the debtor will be required to pay the judgment out of the proceeds of the sale or refinance. If the amount of the judgment is more than the amount of equity in your home, then the lien may prevent the debtor from selling or refinancing until the debtor can pay off the judgment.
Michigan law allows a judgment lien to be attached to either real estate or personal property, but personal property must be attached and exhausted first (MCL 600.6004). A judgment lien must be recorded to be effective (MCL 600.2803), and attaches to all Michigan property owned by the debtor when recorded (MCL 600.2803). Judgment liens last for 5 years in Michigan.
If you reside in another state, see the Bills.com Liens & How to Resolve Them article to learn more.
Each state has its own statute of limitations on civil matters. Here are Michigan’s statutes of limitations for consumer-related issues:
|Credit card||4*||MCL 440.2102 & MCL 440.2725|
|Spoken contract||6||MCL 600.5807|
|Written contract||6||MCL 600.5807|
|Judgment Lien||5||MCL 600.2809|
|* See Fisher Sand and Gravel Co v Neal A. Sweebe, Inc, 293 Mich App 66; 810 NW2d 277 (2011), lv gtd 491 Mich 914; 811 NW2d 496 (2012)|
The statute of limitation clock starts when the contract is breached. Typically, this means 30 days after the date of the last full payment.
Michigan foreclosure laws can be found in MCL Act 210 of 1933. A lender can foreclose judicially or non-judicially in Michigan. A lender can collect a deficiency balance if it uses either judicial or non-judicial foreclosure, but the lender’s rights are limited under non-judicial foreclosure. See the Bills.com anti-deficiency article to learn more about Michigan’s anti-deficiency law.
Michigan has one of the most complicated usury laws in the nation. To see the maximum interest rate a lender can charge you for your loan, see the Michigan Statutory Interest Rate Ceilings (PDF) document published by the Michigan Dept. of Consumer & Industry Services.
Consult with a Michigan lawyer who is experienced in civil litigation to get precise answers to your questions about liens, levies, garnishment, and foreclosure.