Bank account garnishment and wage garnishment is a common issue faced by Minnesota consumers.
If you are facing garnishment, here is what you need to know.
When garnishment occurs
If you receive a collection letter—it is likely just that—a collection letter, not a lawsuit.
Garnishment usually occurs after a judgment has been entered. A judgment requires a lawsuit. A collection letter is just that—an attempt to collect a debt—it is not a lawsuit. Most garnishment happens after a judgment is entered—usually a default judgment because the consumer fails to respond to a summons and complaint.
That said, Minnesota provides for garnishment in three situations:
- After a judgment has been entered (Minn. Stat. § 571.71, subd. 3);
- Pre-judgment garnishment— which occurs after a consumer has been served, but before a judgment has been entered. Under this procedure, a creditor can serve a notice of intent to garnish and exemption form if more than 20 days have passed since the date of service of the summons and complaint, with no response from the consumer. Both forms must be compliant with statutory requirements (Minn. Stat. §§ 571.71, 571.72, subds. 10, 11). Once the consumer receives the notice of intent to garnish, the consumer has 25 days to submit an answer to the lawsuit. During that 25-day period, the debtor cannot obtain a default judgment, they must wait until that time has elapsed.
- By court order after a civil action has commenced (Minn. Stat. §§ 571.71, subd. 1, 571.93).
How garnishment works
Garnishment begins when a creditor serves a garnishment summons and disclosure form on a garnishee (usually a bank). (Minn. Stat. § 571.72, subds. 2, 4, 5). The documents are also served on the debtor. (Id.)
If the debtor is a natural person and the funds to be held are in a financial institution (again, usually a bank), then the creditor must also send an exemption notice to the debtor and financial institution. (Minn. Stat. § 571.72 subds. 4, 8.) The financial institution must also send an exemption notice to the debtor. (Minn. Stat. § 571.913.) The bank must also retain up to 110% of the amount the creditor claims the debtor owes (Minn. Stat. § 571.911.)
What to do if you are served with a garnishment summons
If you have been served with a garnishment summons, you need to carefully read, fill out, and return the garnishment exemption form (along with the requisite documents) within the prescribed time limit. There is a long list of funds that are exempt from garnishment, but the creditor has to be put on notice that those funds are exempt.
There is a rebuttable presumption that all funds in a joint bank account belong to the debtor. That means a bank or other financial institution can freeze up to 100% of the creditors claim before you have a chance to object.If you do not fill out and return an exemption form, the creditor will not know if they are garnishing the wrong funds.
Once a creditor receives an exemption notice, they can request a hearing to decide the issue. At that point, a judge would decide if the funds are exempt or not.
It bears repeating: if a consumer is served with a garnishment summons, they need to carefully read, fill out, and return the garnishment exemption form (along with the requisite documents) within the prescribed time limit.
Vacating the judgment
If you were never served with the lawsuit, you can move to vacate the judgment. If you have a good reason for not responding in a timely manner and have a good defense on the merits, you can move to vacate the judgment.
If you don’t think (or don’t remember) getting served, you can go to your local courthouse and get a copy of the Summons and Complaint with the Affidavit of Service. The Affidavit will state when and where service occurred.
If you believe you have grounds to vacate the judgment, please contact me.