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I receive a lot of calls about garnishments.  Many people are concerned that a creditor or a collection agency can garnish their bank account or wages.  The one thing you have to remember is that a Garnishment is not allowed until a court has entered a Judgment against you.  No creditor or collection agency can garnish your bank account or wages until they obtain a Garnishment.

The one exception is if you owe money to a bank or a credit union on a loan, they may take the money out of your account without a Court Order or Judgment.  This process is called a “set-off.”  Federal benefits, including social security benefits, can be set-off for back child support, alimony obligations and for debts owed to the federal government, including back taxes and student loans.  Certain types of income are exempt from garnishment.  Income exempt from garnishments include social security benefits, unemployment benefits and certain other types of benefits.  If a Judgment creditor attempts to garnish exempt income you have to file an Objection to the Garnishment with the Court.  You have 14 days to file your Objection with the Court and then the Court will determine whether your income or monies in a bank account are exempt from garnishment.

If you are employed, a Judgment creditor can attempt to garnish your wages.  This process is started with a form being sent to your employer to compute the amount that is available for garnishment.  Under federal law, at least $154.50 a week is exempt from garnishment.  If you make more than $154.50 a week, then up to 25% of your wages can be garnished.  If you think the computation of the amount to be garnished is incorrect, you can again file an Objection with the Court to make a proper determination of that amount.  Certain types of income are exempt from garnishment both before and after they are paid to you.  These incomes include social security, supplemental security (SSI), state welfare benefits and veteran’s benefits.  Certain other types of income are exempt from garnishment before they are paid to you, including:  unemployment compensation, worker’s compensation, state and federal civil service retirement benefits, and military retirement benefits.  State law also exempts individual retirement account income and life insurance payable to a spouse or child of the insured.

Pension benefits cannot be garnished before they are paid to you.  However, once you receive the pension income it can be garnished.  So, if you are aware of a threatened lawsuit or Judgment against you, you may want to consider paying your bills in cash or by money order rather than depositing your pension check into an account where it could be garnished.

State of Michigan Homestead Property Tax Credit and tax refunds can be garnished by a Judgment creditor and are subject to set-off to pay back alimony, child support, and debts owed to the State such as income taxes and other taxes.