For most people, a garnish adds a dash of excitement to your
meal. In the world of debt collections,
garnishments are a whole different level of excitement: They are legally authorized money and
property seizures.
Boards of Directors have a basic understanding about steps
leading to a judgment against a delinquent homeowner, but are murky about what comes
afterward. Assuming that the homeowner
does not immediately come forward with the money, there are very specific rules that the attorney must follow to succeed in a garnishment action. One misstep can send everything back to
‘Start’ or even result in penalties against the Association. For example, a garnishment request can only
be granted by a state or superior court, even if the initial judgment obtained
against the homeowner was granted in magistrate court.
Garnishments typically involve contacting the employer or
bank of the homeowner, at least ten days after the judgment has been obtained. A summons is issued, and in Georgia the
receiver cannot respond more quickly than 30 days, but not later than 45
days. The receiver may respond earlier only
if the homeowner is no longer employed with the company, or no longer has a
bank account with the banking institution.
At the same time, the garnishee has to provide the homeowner a copy of
the response. The homeowner has 15 days
from receipt to file a challenge to stop the garnishment (this is known as
filing a traverse). If notice wasn’t
sent by the employer or bank to the homeowner, the 15-day clock doesn’t start
until the homeowner actually finds out about the situation, perhaps when
looking at his next paycheck or bank statement.
So, although a judgment has already been rendered, the homeowner gets
another opportunity to challenge the situation.
There are over a dozen technicalities the homeowner can raise, and
working through the challenge may add months to the wait.
If the garnishee receiving the summons fails to respond, a
default judgment for the full amount may be obtained against the employer or
bank. We did see this occur in one
instance, where the bank failed to respond and was ordered to pay $45K to the
homeowner association. The bank was
given another sixty days after the judgment against it to respond, but failed
to do this. It paid the Association and
then had to pursue the homeowner afterward for reimbursement. It likely wrote the amount off as
uncollectible.
Assuming the bank or employer does respond, usually only a
small portion of the judgment is initially collected. In Georgia, the maximum amount that can be
withheld from a paycheck is 25% of net income, but only after reducing net
income by 30 hours times the current minimum wage. For example, if the homeowner normally brings
home a $1,000 net income paycheck every two weeks, then the amount that can be
garnished is $500 - $217.50 (30 hours x $7.25) multiplied by 25%, or $70.62
each week. Wage garnishments stay in
effect for 6 months, and additional summons to the garnishee may be issued
until the full amount is paid. Money
from retirement, unemployment, social security, life insurance, alimony, etc.
is exempt from garnishment. If at any
point a summons is not issued for a two year period, the right to garnish ends. The judgment itself expires after seven years
unless an extension is granted by the courts.
Any funds sent in by the employer or bank go directly to the
court, and then are forwarded to the collection attorney, who passes them on to
the management company. It is not
unusual for this part of the process to take two months, before the money lands
in the Association’s bank account.
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