Winning a collection lawsuit feels like the finish line. For many businesses it is closer to the halfway mark. A money judgment is the court’s official declaration that the debtor owes you a specific amount. It is not a payment, and the court does not collect it for you. If the debtor does not pay voluntarily, turning that judgment into money is up to the creditor.

Michigan gives judgment creditors a solid set of tools for that work. Knowing what they are, and the order in which they usually make sense, is often the difference between a judgment that gets paid and one that sits in a file until it expires.

A note on scope: our firm represents creditors. This article is written for businesses and lenders collecting what they are owed. It is not advice for debtors, and it is a general overview rather than advice about any particular judgment.

When you can start collecting: the 21-day stay

Under the Michigan Court Rules (MCR), a creditor generally cannot begin enforcing a judgment until 21 days after it is entered. MCR 2.614(A)(1). If the debtor files a timely motion for a new trial, for reconsideration, or for other relief from the judgment, the wait extends until 21 days after the court decides that motion. The same rule allows the court to stop the debtor from transferring or disposing of property during the waiting period, which can matter when there is reason to think assets are about to move.

Those three weeks are a good time to plan. Three questions drive the rest of the process: What does the debtor own? Who owes the debtor money? Who pays the debtor on a regular basis?

Find the assets: creditor’s examinations and supplementary proceedings

If you do not know where the debtor’s money is, Michigan law lets you make the debtor tell you. After a money judgment is entered, the court may, on motion, compel discovery of the debtor’s property, prevent transfers of that property, order the judgment satisfied out of property that is not exempt, and appoint a receiver. That authority comes from the Revised Judicature Act, part of the Michigan Compiled Laws (MCL), at MCL 600.6104. The statute also provides that a creditor does not have to attempt an execution and have it come back unsatisfied before using these tools.

The best known of these tools is the creditor’s examination. On an affidavit, the judge may issue a subpoena requiring the judgment debtor, or a third party who holds the debtor’s money or property or owes the debtor money, to appear, answer questions under oath, and produce books and records bearing on the debtor’s property or income. MCL 600.6110(1). The court rules add that a judgment creditor may also use ordinary civil discovery, and that the court may appoint a receiver when necessary to protect the creditor’s rights. MCR 2.621(B)(2), (E). A person who violates an order restraining transfers can be held in contempt. A third party who violates it can face a judgment for the unpaid balance of the judgment or the value of the property transferred, whichever is less. MCR 2.621(F).

For a business debtor, the examination usually focuses on bank accounts, the customers who owe the business money, and any real estate or titled equipment. The answers point to the next step.

Garnishment in Michigan: wages, bank accounts, and receivables

Garnishment lets a creditor reach money or property that a third party, called the garnishee, holds for the debtor or owes to the debtor. It is the workhorse of Michigan collections, and it comes in two forms. MCR 3.101(B).

A nonperiodic garnishment reaches a one-time pool of money or property, such as a bank account or a debt that a customer owes the debtor. A garnishee is liable for debts it owes the debtor when the writ is served, whether or not those debts are yet due, so a business debtor’s accounts receivable can be a real target. MCR 3.101(G)(1)(d).

A periodic garnishment reaches ongoing payments, including wages, salary, commissions, bonuses, rent, and land contract payments. MCR 3.101(A)(4). Under the current rule, a periodic writ stays in effect until the amount withheld covers the unpaid judgment, interest, and costs stated in the creditor’s verified statement (or in a later balance statement sent under the garnishment statute), or until the creditor files a notice that the judgment has been satisfied. MCR 3.101(B)(1)(a). A creditor cannot serve a second periodic writ on the same garnishee for the same judgment while the first one remains in effect. MCR 3.101(B)(1)(b).

The process runs on deadlines. The creditor files a verified request, on the state-approved form, with the clerk of the court that entered the judgment, and the clerk issues the writ if it is in order. MCR 3.101(C), (D). The writ must be served on the garnishee within 182 days after it is issued. MCR 3.101(E)(2), (F)(1). The garnishee then has 14 days to file a disclosure stating what it holds or owes, and the debtor has 14 days after being served to object. MCR 3.101(E)(3)(b), (E)(5). If no objections are filed, the garnishee sends the withheld funds after 28 days. MCR 3.101(J)(1).

Objections are narrow. A debtor may argue, for example, that the funds are exempt, that a bankruptcy case or an installment payment order bars the garnishment, or that the judgment has already been paid. Objections cannot be used to reargue whether the judgment was correct. MCR 3.101(K)(1) and (2).

Limits on what garnishment can take

Garnishment has built-in limits. For ordinary debts, federal law caps wage garnishment at the lesser of 25 percent of the debtor’s disposable earnings for the week or the amount by which those earnings exceed 30 times the federal minimum hourly wage. 15 U.S.C. § 1673(a). Support orders and tax debts are treated differently. 15 U.S.C. § 1673(b)(1). A garnishment or order with higher priority can also leave little or nothing for a creditor’s writ until that earlier order stops being effective. MCR 3.101(B)(1)(c).

Bank accounts have their own protections. When federal benefits such as Social Security or VA benefits are directly deposited into an account, federal regulations require the bank to protect the lesser of two months of those deposits or the account balance before freezing anything in response to a garnishment. 31 C.F.R. §§ 212.3, 212.6. The Michigan rule separately bars a bank from withholding funds from an account into which only certain clearly identifiable exempt benefits are directly deposited. MCR 3.101(I)(6).

Garnishees have obligations too. In a nonperiodic garnishment, a garnishee that fails to file its disclosure or take other required steps on time can be defaulted, although the default judgment cannot exceed the limits the rule places on the garnishee’s liability. MCR 3.101(S)(1)(a).

Judgment liens on Michigan real estate

If the debtor owns real estate in Michigan, a judgment lien can attach to it. The creditor files a notice of judgment lien with the court, the clerk certifies it, and the creditor records it with the register of deeds in the county where the property is located. MCL 600.2803, 600.2805(1). The notice does not need a legal description of the property. MCL 600.2805(2). Once recorded, the lien attaches to the debtor’s interest in real property in that county, including an interest the debtor acquires later. MCL 600.2803. A certified copy must also be served on the debtor, by certified mail in most cases and by personal service if the judgment is $25,000 or more. MCL 600.2805(3), (4).

A judgment lien expires five years after it is recorded. It can be rerecorded only once, and the second notice must be recorded at least 120 days before the original expiration date, which extends the lien for another five years. The lien also ends if the underlying judgment expires first. MCL 600.2809. Those dates belong on the calendar the day the lien is recorded.

A judgment lien rarely forces a sale on its own. Its real value is leverage. It generally has priority over liens recorded after it, with important exceptions that include purchase money mortgages, advances under a previously recorded future-advance mortgage, construction liens, association assessment liens, and state or federal tax liens. MCL 600.2807(2). When the property is sold or refinanced, the creditor’s recovery is limited to the debtor’s equity after senior liens, property taxes, and closing costs are paid. MCL 600.2807(3). And a judgment lien does not attach to property that spouses own as tenants by the entirety unless the judgment is against both of them. MCL 600.2807(1). A lien on a debtor’s building will not pay you tomorrow, but it often means you get paid before the debtor can sell or refinance.

Execution: seizing property that is not exempt

In general terms, a writ of execution under Chapter 60 of the Revised Judicature Act (MCL 600.6001 et seq.) authorizes a court officer or sheriff to seize the debtor’s nonexempt property and sell it toward the judgment. For a business debtor, that can mean equipment, inventory, or vehicles. Execution is often less efficient than garnishment: the property has to be located, seized, stored, and sold, and a forced sale may bring far less than the property is worth.

Michigan law also protects certain property of individual debtors from execution. The list in MCL 600.6023(1) includes, among other things, household goods and tools of a trade up to stated dollar limits, a limited homestead exemption, and individual retirement accounts and qualified retirement plans, subject to statutory exceptions. A creditor should understand these exemptions before paying for a levy.

Watch for an installment payment order

A debtor who cannot pay in full may ask the court for permission to pay the judgment in installments. MCR 3.104(A); MCL 600.6201 et seq. The motion is granted without a hearing unless the creditor files written objections within 14 days after the motion is served. MCR 3.104(B). An installment payment order bars garnishment while it is in effect, so a creditor who ignores the motion can find collection limited to a payment schedule it never agreed to. MCR 3.101(K)(2)(c). If the debtor stops making the payments, the creditor can move to set the order aside. MCR 3.104(C).

How long a Michigan judgment lasts, and how to renew it

A judgment from a Michigan court of record can be enforced for 10 years from the date it is entered. Within that period, the creditor can bring an action on the judgment for a new judgment, and the new judgment is subject to the same 10-year period. MCL 600.5809(3). Small claims judgments are treated differently: the statute classifies them as judgments of a court not of record, which carry a 6-year period. MCL 600.5809(3). Missing the deadline can end the creditor’s ability to enforce a debt the debtor still owes, so the renewal date should be tracked from the start.

If the debtor files bankruptcy

A bankruptcy filing changes the picture at once. The automatic stay generally requires the creditor to stop garnishments, executions, and other collection activity, and a pending bankruptcy is one of the listed grounds for objecting to a garnishment. MCR 3.101(K)(2)(b). The questions then become whether to file a proof of claim and which deadlines apply, which we cover in Your Customer Filed for Bankruptcy. Don’t Ignore the Claim.

If the assets seem to have disappeared

Sometimes the examination shows that the debtor’s property was recently moved to a relative, an insider, or a newly formed company. Michigan’s voidable transactions law can reach some of those transfers, and the garnishment rule itself makes a garnishee liable for property it holds through a transfer that is void as to the debtor’s creditors. MCR 3.101(G)(1)(h), (i). We discuss how courts analyze those transfers in The Debtor Deeded the Property to a Family LLC. A Michigan Court Just Undid It.

The practical takeaway

Collecting a judgment takes a sequence of steps, and most of them have deadlines. In many cases it makes sense to:

  • calendar the 21-day stay, the 10-year judgment deadline, and any judgment-lien expiration as soon as each date arises;
  • hold a creditor’s examination early if you do not know what the debtor owns;
  • garnish bank accounts and the debtor’s customers or employer, using the required forms and meeting every deadline;
  • record a judgment lien in each county where the debtor owns real estate;
  • object within 14 days to any installment payment motion you do not accept, and be ready for a hearing on any garnishment objection, which the rule schedules within 21 days after the objection is filed; and
  • stop all collection immediately if the debtor files bankruptcy, then evaluate a proof of claim.

A judgment enforced promptly and methodically is far more likely to turn into money. One that is set aside for later often never does.

Frequently asked questions

How soon after a judgment can I start collecting in Michigan?

Generally 21 days after the judgment is entered. If the debtor files a timely motion for a new trial, for reconsideration, or for other relief from the judgment, enforcement generally waits until 21 days after the court decides that motion. MCR 2.614(A)(1).

How much of a debtor’s paycheck can be garnished?

For ordinary debts, federal law limits wage garnishment to the lesser of 25 percent of weekly disposable earnings or the amount by which those earnings exceed 30 times the federal minimum hourly wage. Support orders and tax debts are subject to different rules. 15 U.S.C. § 1673.

How long is a Michigan judgment good for?

A judgment from a Michigan court of record can be enforced for 10 years, and the creditor can renew it by bringing an action on the judgment within that period. Small claims judgments carry a 6-year period. MCL 600.5809(3).

Can I put a lien on the debtor’s house or building?

Yes, by recording a certified notice of judgment lien with the register of deeds in the county where the property is located. The lien lasts five years and can be rerecorded once. It does not attach to property that spouses own as tenants by the entirety unless the judgment is against both spouses. MCL 600.2803, 600.2807, 600.2809.

What happens to my collection efforts if the debtor files bankruptcy?

Collection generally must stop because of the automatic stay. The next step is usually deciding whether to file a proof of claim and tracking the deadlines in the bankruptcy case.

Related reading: Michigan creditor representation and commercial collections, filing a proof of claim when a customer files bankruptcy, and undoing a debtor’s transfer to a family LLC.

Holding a judgment that has not been paid?

The Law Offices of Maynard F. Newman, P.L.L.C. represents creditors in Grand Blanc and across Michigan, from debtor examinations and garnishments to judgment liens and renewals.

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Please note: This article is provided for general educational and informational purposes only and does not constitute legal advice. Reading it does not create an attorney-client relationship between you and the Law Offices of Maynard F. Newman, P.L.L.C. Collection remedies, exemptions, and deadlines depend on the specific judgment, the debtor, and the property involved, and the statutes and court rules can change; confirm the current law before relying on any summary. You should consult a qualified Michigan attorney about your own circumstances before acting. This content may also be considered attorney advertising.