Michigan Collection Laws
- Michigan's statute of limitations on credit card debt is 4 years.
- Michigan allows you to file an objection to a wage or account garnishment.
- Michigan requires creditors to follow strict rules before allowing liens.
Michigan's Rules For Garnishment, Liens, Foreclosure & More
A lender, collection agent or law firm that owns a collection account is a creditor. The law gives creditors several means of collecting delinquent debt. But before a creditor can start, the creditor must go to court to receive a judgment. See the Bills.com article Served Summons and Complaint to learn more about this process.
The court may grant a judgment to the creditor. A judgment is a declaration by a court the creditor has the legal right to demand a wage garnishment, a levy on the debtor’s bank accounts, a lien on the debtor’s property, and in some states, ask a sheriff to seize the debtor’s personal property. The laws calls these remedies. A creditor granted a judgment is called a judgment-creditor. Which of these tools a judgment-creditor will use depends on the circumstances. We discuss each of these remedies below.
Michigan Wage Garnishment
The most common remedy judgment-creditors use to enforce judgments is wage garnishment. Here, the judgment-creditor contacts the debtor’s employer and require the employer to deduct a certain portion of the debtor’s wages each pay period and send the money to the creditor. However, several states — Texas, Pennsylvania, North Carolina, and South Carolina — do not allow wage garnishment for the enforcement of most judgments. In several other states, such as New Hampshire, wage garnishment is not the “preferred” method of judgment enforcement because, although possible, it is a tedious and time consuming process for creditors.
In most states, creditors are allowed to garnish between 10% and 25% of your wages, with the percentage allowed being determined by each state.
Garnishment of Social Security benefits or pensions for consumer debt is not allowed under federal law. Michigan law permits earnings garnishment for child support and maintenance up to 25% of the debtor’s disposable income.
In Michigan, wage garnishment is allowed under Michigan Court Rule 3.101 (PDF).
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.
Levy Bank Accounts in Michigan
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:
- Individual Retirement Accounts (IRAs)
These federal benefits:
- Social Security benefits and disability payments
- Supplemental Security Income (SSI) payments
- Student loan disbursements
- VA Benefits
Michigan General Assistance Benefits
- Family Independence Program (FIP) grants
- Food Assistance Program (FAP)
- Electronic Benefits Transfers (EBT)
- State Disability Assistance
- Unemployment Compensation benefits
- Worker’s Compensation benefits
- Cash value of life insurance policies that are payable to your spouse or children
- Income benefits under the Michigan Civil Service Act
- Income benefits under the Michigan Retirement Act
- U.S. Civil Servant Retirement benefits
- Pensions accounts covered by ERISA (however pension funds moved in your general accounts are not exempt)
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 (MCL 600.2809).
If you reside in another state, see the Bills.com Liens & How to Resolve Them article to learn more.
Michigan Statute of Limitations
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|
|* 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)|
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 Usury 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.
Michigan Collection Laws Recommendation
Consult with a Michigan lawyer who is experienced in civil litigation to get precise answers to your questions about liens, levies, garnishment, and foreclosure.
- Bad Credit
- Chase Credit Card Debt Consolidation
- Consolidate My Debt
- Bill Consolidation
- Buy a Home with an FHA loan
- Tax Debt Relief Options
- Hardship Based Loans
- Debt Consolidation Loans
- Pay Off Loans
- Consolidate Bills
- Lexington Law Review
- Best Debt Options
- Personal Finance Tips
- To Pay Credit Cards or to Save?
- Frozen Bank Account
- New Jersey Lien Foreclosure & Sale
- Refinance Vehicle Loan
- Old Judgment Collection
- Negotiate Mortgage Collection Account
- Capital One Balance Confusion
- Summons for American Express Debt
- Sell Timeshare
- Minnesota Family Law
- What Kind of Judgment Can I Expect?
- Harassment by Debt Collectors
- Judgment Won Against Me
- If I Default on Everything What is the Worst That Can Happen?
- Can I inherit credit debt?
- Can I consolidate debt on a purchase home loan?
- Sell Forgiven Debt
- Credit Card Lawsuit in Pennsylvania
- Debt to Credit Ratio
- Personal Debt Collection
- Target Visa
- Pension Garnished After Foreclosure
Search answers to other readers' questions, or ask your own and get a personal answer!
Learn how much you can save over time by cutting back on your daily latte or other small expenses that add up!
Consolidation? Credit counseling? Debt settlement? Bankruptcy? New loans? Debt Coach, a free online tool, gives tailored advice to help you find the right solution for your needs.
Use our Debt Consolidation Calculator to learn how much your loans actually cost, and to find solutions to save money!
How savvy are you about your personal finances? Take this quick quiz to learn insights into your finance habits and your Bills IQ.
Deciding if a mortgage refinance loan is right for you? Our calculators make it easy. Plug a few key facts about your old loan into our calculator, and learn if a refinance makes sense for you.
See today's national averages for adjustable and fixed-rate mortgages. Then drill-down to learn what is the best rate for you!
Learn what your fellow Bills.com readers think about financial solutions providers and mortgage lenders. We want you to share your experiences, too!
If you want to dive deep into your debt relief options, including the costs of each solution, read these whitepapers. Includes references, so you can follow-up on each fact cited.
Bills.com experts explain, in fast-paced videos, the basics of refinance, debt relief, student loans, and more.
Tool Box Easy to use resources to help you find solutions to your money questions