Quick Discussion of Creditor's Rights

If you are a creditor in Michigan, you may face some challenges when trying to collect a debt from a debtor. Michigan law gives debtors certain rights and protections that may limit your options for enforcing a judgment or recovering your money. In this blog post, we will discuss some of the aspects of creditor's rights law in Michigan that you should be aware of.

One of the first steps to collect a debt is to obtain a judgment against the debtor. A judgment is a court order that declares that you have the legal right to demand payment from the debtor. To get a judgment, you must file a lawsuit against the debtor and prove that they owe you money. You must also serve the debtor with a copy of the lawsuit and give them an opportunity to respond.

If you win the lawsuit, you must wait 21 days before you can ask the court for a writ of garnishment. A writ of garnishment is a document that authorizes you to garnish (take) a portion of the debtor's wages, bank accounts, or other income sources until they pay off their debt. During this 21-day period, you are supposed to work out a payment plan with the debtor. If they pay within this time frame, you cannot garnish their income.

The amount that you can garnish depends on several factors, such as whether the debt is secured or unsecured, whether it is for child support or maintenance, and whether the debtor has any exemptions or defenses. Generally speaking, Michigan law allows creditors to garnish up to 25% of the debtor's disposable income for unsecured debts and up to 50% for child support and maintenance debts.

Another option for collecting a debt is to place a lien on the debtor's property. A lien is a legal claim that gives you priority over other creditors when it comes to selling or foreclosing on the property. To place a lien on real property (such as land or buildings), you must record your judgment with the county register of deeds where the property is located. To place a lien on personal property (such as vehicles or equipment), you must file your judgment with the Michigan Secretary of State.

A lien does not guarantee that you will get paid immediately. You still have to wait until the debtor sells or refinances their property before you can receive any money from them. However, by placing a lien on their property, you prevent them from transferring it without paying off their debt first.

A third option for collecting a debt is to seize and sell some of their personal belongings. This method is called execution or levy. To execute on your judgment, you must ask the court for an order directing an officer (such as a sheriff or constable) to take possession of certain items owned by the debtor and sell them at public auction.

However, execution is not an easy or common way to collect a debt in Michigan. There are many restrictions and exemptions that protect the debtor's essential and personal items, such as clothing, furniture, appliances, tools, and vehicles. You also have to pay the costs of seizing and selling the items, which may exceed their value. Therefore, execution is usually reserved for cases where the debtor has valuable assets that are not subject to liens or exemptions.

As you can see, creditor's rights law in Michigan is complex and challenging. If you are a creditor in need of legal assistance to collect a debt, you should consult with an experienced attorney who can advise you on your options and represent you in court. An attorney can help you obtain and enforce a judgment effectively, while respecting the rights and protections of your debtor.

This blog does not constitute legal advice. By reading this blog you are not creating an attorney/client relationship with North Coast Legal, PLC. An attorney/client relationship is established once you and North Coast Legal, PLC have entered into a retainer agreement for services to be rendered.