Some Income Is Protected from Garnishment
If you are facing a garnishment of funds for outstanding debts, you may be able to protect your money if it came from certain sources.
Other methods of protecting your funds, such as creating a corporation or placing money in a jointly-held bank account are unreliable for protecting your money. However, protection of exempted funds is not automatic–you must prove the source of income to receive protection, so it’s important to contact a lawyer when you are facing garnishment of funds.
Some people think that creating a corporation will protect their funds. Even if you are the signator and sole shareholder of the corporation, those funds are protected from direct garnishment, if the judgment does not pertain to the corporation itself. However, your creditor or creditors may be able to obtain a receivership to take possession of your affairs. The receiver will then have access to the corporate funds and can pay them to your creditors.
Similarly, you might think that a joint account will protect at least half your funds if the other party on the account is not a party to your debt, but this is uncertain. If any of the funds are shown as belonging to you and eligible for garnishment, then a judge has the discretion to allow seizure of all funds. The only way to protect these funds is to show that all funds either belong to the debtor or are exempt from garnishment.
Funds Exempt from Garnishment
Garnishment is intended to give your creditors access to funds that you are unwilling to turn over voluntarily. However, the process is not intended to leave you completely destitute if you are unable to earn sufficient wages to support yourself. To ensure you are able to sustain yourself despite disability, retirement, or other eventualities, the law protects some forms of income.
Protected forms of income include both federal and Michigan benefits:
- Individual Retirement Account (IRA)
- Social Security benefits
- Supplemental Security Income (SSI) benefits
- Veterans’ Assistance benefits
- US civil service retirement benefits
- Aid to Families with Dependent Children (AFDC)
- General Assistance (GA) benefits
- Unemployment compensation benefits
- Workers’ Compensation benefits
- Income benefits received under the Michigan Civil Service Act
- Income benefits received under the Michigan Retirement Act
- The first $500 on deposit in a savings and loan savings account
This is not an exhaustive list. If you are facing garnishment of funds, it is important to consult a lawyer to determine what funds might be protected under law.
Protecting Your Funds
These funds are not automatically protected. If a garnishment is attempted, your account may be frozen immediately, and you may have as little as 14 days to file an objection!
You will then be granted an objection hearing at which you will be given the opportunity to prove the funds come from an exempted source. You must attend this hearing or it will be dismissed and you will lose the funds, no matter their source.
At Jay Trucks and Associates, we work hard to obtain Workers’ Compensation and other benefits for people who have been injured. We want to make sure those funds are protected according to the law. To learn more about protecting these funds from garnishment, please contact us today.