Courts would protect more income and property from debt collection

If enacted, debtors would have specified income, benefits, earnings, bank funds, vehicles, household goods, business tools, and homes protected from seizure or garnishment. The provisions cover Michigan residents regardless of where their property is located, and cover people whose jobs are physically located in Michigan; they also address nonresidents and joint accounts. Support orders, tax collections, and certain employment-security levies are excluded from these protections. A debtor's weekly garnishable earnings generally could be taken only up to the smaller of the amount above 35 times the higher applicable minimum wage or 15% of those earnings. The text lists dollar limits for several protected assets, including $5,000 for household goods, $5,000 for a motor vehicle, $10,000 for work tools, and up to $125,000 or $200,000 for a homestead, depending on age or disability. Money from protected property would generally remain protected for 18 months if it can be traced, using a first-in, first-out method. The provisions would take effect 180 days after enactment; later dollar adjustments would apply to cases filed after March 31 following each adjustment date.

If enacted, courts and collection officers would have to notify debtors about protected property and hearing rights before or during many collection actions. These procedures apply to execution, which includes court-ordered seizure or freezing of property, and to judgments for consumer debt and other money judgments. A court-appointed officer would have to carry out a seizure under a writ or order that states the property's value and how it may be taken. Property that appears fully protected would generally not be seized unless the creditor requests a hearing and proves that the protection does not apply or that the property has value above the protected amount. Debtors would be able to contest seizures, claim exemptions, or seek to set aside a judgment. If sale proceeds do not cover collection costs, the creditor would have to pay the shortfall and could not recover it from the debtor or garnishee. The notices and hearing rights would apply when a judgment is entered, property is targeted for seizure, or a debtor is subpoenaed for a financial examination; the act would take effect 180 days after enactment.

If enacted, creditors, employers, financial institutions, and the state treasurer would follow added procedures for ongoing garnishments, protected funds, and intercepted state tax refunds. The provisions address periodic payments such as wages, rent, and other recurring payments; bank accounts; state tax refunds; and people involved in garnishment cases. Creditors would have to provide balance statements at least every six months and release the garnishment within 21 days after full payment. A financial institution would have to identify protected benefits deposited during the prior 90 days and could not turn those funds over under the garnishment. For certain consumer-debt garnishments served after January 1, 2027, the state treasurer would, when practicable, avoid intercepting the specified state earned-income tax credit, while preserving state setoffs and other claims. A creditor generally could not seek a garnishee's default without first giving notice of the failure and allowing time to fix it. The general provisions would take effect 180 days after enactment; the tax-credit protection would apply to writs served after January 1, 2027.