Michigan Collection Laws
- 7 min read
- 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
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:
- Wage garnishment
- Account levy
- Lien on real property
- Seize personal property
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.
Michigan Wage Garnishment Rules
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.
Learn the Limits of a Wage Garnishment
In most states, creditors may garnish between 10% and 25% of your wages, with the percentage allowed determined by state law. Garnishment of Social Security benefits or pensions for consumer debt is not allowed under federal law, but may be allowed for child support. See the Bills.com Wage Garnishment article to learn more.
In Michigan, wage garnishment is allowed under Michigan Court Rule 3.101. 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.
Get Debt Assistance through Bills.com Debt Navigator
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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 judgment lien laws are found Compiled Laws Section 600.2809, Section 600.4035, Section 600.6004, Section 600.6017, and Section 600.6018.
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.
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|
|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)|
Michigan statutes of limitations. Source: Bills.com
The statute of limitation clock starts when the contract is breached. Typically, this means 30 days after the date of the last full payment.
Debt Collectors and Your Rights
Collection agents violate the FDCPA if they file a debt collection lawsuit against a consumer after the statute of limitation expired (Kimber v. Federal Financial Corp. 668 F.Supp. 1480 (1987) and Basile v. Blatt, Hasenmiller, Liebsker & Moore LLC, 632 F. Supp. 2d 842, 845 (2009)). Unscrupulous collection agents sue in hopes the consumer will not know this rule.
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.
Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q4 2022 was $16.91 trillion. Auto loan debt was $1.55 trillion and credit card was $0.99 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Collection and delinquency rates vary by state. For example, in Texas, 15% have student loan debt. Of those holding student loan debt, 9% are in default. Auto/retail loan delinquency rate is 6%.
While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.
I received a garnishment from a October 2013 judgment. Is this valid? If so, can I pay the money owed to the court? Collection lawyers are so untrustworthy.
MJ, I will share some information with the understanding that I am not a lawyer and I am not giving legal advice.
How were you made aware of the garnishment? If it is from your employer's payroll department, then a judgment was almost assuredly issued against you by a court, whcih gives the creditor the right to get money from your paycheck. You can pay the debt off, if you have the ability to do so, and end the garnishment, but you would not pay the court. You would pay the collection agency. I imagine they would be pleased to have you pay the debt off and would be willing to sign paperwork that your payment closes the matter completely, with the account at a $0 balance.
How come a bank says I owe them money for overdraft on my bank account from over 10 years ago? They say I owe $5000 and now they want me to do a settlement? Please help.
Kua, I am not a lawyer, so you are not to take any information I share as legal advice.
If the debt is from 10 years ago, I believe it is past the statute of limitations on debt, because the statute of limitations on a written contract is 6 years. That doesn't mean you don't owe the debt, but it limits the ability of the creditor to collect from you.
If I were in your shoes, I would never open another account at that bank, as money in the account could be taken to pay for the debt. If you rceive a letter about this, respond by validating the debt. If you are sued, go to court and use the SOL as an affirmative defense. If you give them a penny, you could restart the clock on the statute of limitations.
You can contact an attorney that handles violations of the FDCPA (Fair Debt Collection Practices Act), to find out if you are being contacted illegally. This kind of lawyer doesn't charge you a fee but will take the case if they feel they can win and get money from the creditor harassing you. Do a search online for FDCPA attorney and the name of the city in which you live. Please report back on how things go for you!
I'm a 1099 contractor, can creditors garnish my wages in Michigan?
Samantha, 1099 income is not wages, the same as W-2 income. There are ways a judgment-creditor can get access to a non-earnings garnishment and come after the payments that are to be made to you, if they know the source(s) of your 1099 income.
A writ of garnishment was given in 2008 a payment plan was made. Can a lender come back in 2020 without renewing the writ?
Mike, I believe that the creditor could possibly come back and garnish without renewing the judgment, eventhough the statute of limitations on a judgment in Michigan is 10 years and it is more than 10 years since your judgment took place. The reason is that, according to information on this page of the official Michigan Courts website, the clock doesn't run on the 10-year statute of limitations on a judgment durintg the time an installment agreement payments are being made.
"The statute of limitations is tolled (stopped) during the time that the judgment is being paid in installments. See MCL 600.6107 and MCL 600.6235."
If your installment agreement was in place long enough for the tolling period to be subtracted from the total time since the 2008 judgment and not be 10 years, then I believe renewal would not be an issue.
Do you know if there are specific Michigan laws that outline how much an organization, specifically a college, is allowed to charge someone in fees for an unpaid bill? If so, can you give me the MCL number? Thanks
Thank you, John, for sharing your question. I am not a lawyer, so please don't consider this legal advice.
I was not able to find a maximum late fee for college payments in Michigan. I noticed that they varied by school, and some schools are willing to work out an arrangement. A standard fee of $25 is common, but maybe you refer to the interest they are charging?
I suggest that you obtain the college records and speak to a local consumer group, a lawyer, or the CFPB.