Presentation on theme: "UNDERSTANDING GARNISHMENTS Government Finance Officers Association of Louisiana October 8, 2014 Presented by:Rick McGimsey & Lindsey Hunter Lindsey Hunter."— Presentation transcript:
UNDERSTANDING GARNISHMENTS Government Finance Officers Association of Louisiana October 8, 2014 Presented by:Rick McGimsey & Lindsey Hunter Lindsey Hunter
What is a garnishment? A garnishment is a judicial proceeding in which a creditor asks the court to order a third party who is indebted to the debtor to turn over to the creditor any of the debtor's property held by that third party.
Waiver of Immunity The State of Louisiana expressly waives any immunity from suit insofar as the garnishment of nonexempt portion of wages, salaries, commissions, or other compensation of public officials, whether elected or appointed, public employees, or contractors is concerned, of itself, its agencies, boards, commissions, political subdivisions, public corporations, and municipal corporations. La. R.S. 13:3881(C).
How Does a Garnishment Commence? After getting a money judgment against a defendant, the plaintiff, i.e., now the judgment or seizing creditor, obtains a writ of fieri facias (“fifa”) from the court. The judgment creditor then petitions the court for garnishment of the defendant’s wages. Written notice must be sent to judgment debtor by creditor. The judgment creditor asks that the defendant’s employer be cited as garnishee and answer garnishment interrogatories under oath. The judgment creditor shall send to the judgment debtor written notice of the filing of the garnishment petition by mail or electronic means. La. C.C.P. art
Proper Service for State Employees: La. C.C.P. art Service of garnishment petitions against wages, salaries, or commissions of employees employed within the executive branch of state government shall be made in the following manner: (1)For employees paid through the statewide uniform payroll of the division of administration, service shall be made on said office. (2)For all other employees not covered by (1), service shall be made only on the secretary of the department employing the debtor or on his designee.
Effect of Service Employer should begin withholding from date of service. Employer has 15 days from date of service to prepare and file sworn answers to the interrogatories. Failure to answer under oath treated as failure to answer Examples of interrogatories Court must grant leave to amend answer to interrogatories
3 Options After Petition & Interrogatories are Served OPTION ONE: Garnishee files sworn answer & court issues garnishment judgment. Hearing is not necessary. Judgment is served on garnishee days to obtain judgment from filing of answer -Judgment for employees paid on commission basis: La. R.S. 13:3926 Judgment should allow employer to deduct $3/pay period from non-exempt portion of wages (i.e., 25% being withheld) to cover costs. Judgment might allow $15 to be withdrawn from court for answering if attorney files answer
Option 2: No Answer Filed; Judgment Pro Confesso If the garnishee fails to answer timely, the seizing creditor may move for a judgment pro confesso, i.e., a judgment against the garnishee for the amount of the judgment. Contradictory hearing must be held on motion Judgment must be rendered after hearing unless garnishee proves he has no property of debtor Costs & attorney’s fees associated with motion awarded to creditor regardless of outcome
Option 3: Rule to Traverse- La. C.C.P. art Creditor may file contradictory rule to traverse garnishee’s answers 15 days from date of service of notice of filing garnishee’s answers Creditor must disprove garnishee’s answers If answers are filed and creditor fails to traverse them, any property other than that admitted in answer is released from seizure.
Remit $$ to Sheriff After the garnishee knows the proper amount to remit, it should send that money to sheriff each pay period. 6% commission for constable is permitted by 33:1428(A)(7)(a) to be paid by plaintiff in writ. Tucker v. Fowler, (La. 2/28/96), 668 So. 2d 718. Sheriff gets 6% even if judgment orders funds paid directly to seizing creditor. Stevens v. Lockett, 528 So. 2d 689 (La. App. 2 Cir. 5/4/1988).
How Much Money Does Garnishee Withhold? In every garnishment, “a judgment shall be rendered by the court of competent jurisdiction in which the garnishment proceedings may be pending fixing the portion of such wage, salary, commission, or other compensation as may be exempt, as provided by law, and providing for the payment to the seizing creditor of whatever sum for which judgment may be obtained, out of the portion of such compensation which is not exempt.” La. R.S. 13:3921(A). Only 25% of “disposable earnings” may be withheld from each paycheck. Exception for child or spousal support orders Exception for IRS lien 30 x federal minimum wage exception
Disposable Earnings Disposable earnings are the part of the earnings of any individual remaining after the deduction of any amounts required by law to be withheld and those amounts that are reasonable and are being deducted in the usual course of business at the time the garnishment is served upon the employer. 25% of disposable earnings may be garnished Employee must always be left with weekly pay of 30x federal minimum wage (30 X $7.25 = $217.50)
Example 1: Weekly Wages Creditor Garnishment DISPOS. EARN. NET PAY GROSS PAY $900 -Soc. Sec/Medicare Federal Income Tax State Income Tax Medical Insurance Life Insurance Retirement Credit Union -50 $ 620 $ 570 $ 620 $ % Garnishment - 155_________ Employee keeps $465
Example 2: Weekly Wages Creditor Garnishment DISPOS. EARN. NET PAY Gross Pay $350 Soc. Sec./Medicare -20 Federal Income Tax -30 State Income Tax -10 Medical Insurance -25 Life Insurance -10 Retirement -25 Credit Union -50 $230 $180 25% Garnishment Employee keeps?? $172.50** (continued)
Example Two, cont’d. DISPOS. EARN. NET PAY $230 $180 $230 $180 25% Garnishment Employee keeps?? $172.50** **But federal law requires that employee always keep $ per week (30 x federal minimum wage) DISPOS. EARN. NET PAY $ 230 $180 $ 230 $180 Employee keeps Garnishment payment $ 12.50/wk
Are Disability Payments Earnings? Disability payments ARE earnings if made pursuant to a contract of health, accident or life insurance. In this case, they are EXEMPT. Disability payments simply made by employer and not pursuant to insurance policy are NOT EXEMPT.
Are Workers’ Compensation Payments Earnings? Workers’ Compensation payments are exempt from all claims of creditors and from levy or execution or attachment or garnishment, except under a judgment for alimony in favor of a wife, or an ascendant or descendant. La. R.S. 23:1205. LA courts have interpreted this provision as applying to benefits due, not benefits received.
Are Retirement Benefits Earnings? La. R.S. 11:405: An annuity, retirement allowance or benefit, or refund of contributions, or any optional benefit paid to any person... is exempt from garnishment. Exception: retirement benefits may be garnished to pay support judgments. La. R.S. 11:292.
Satisfaction of Garnishment Garnishment continues until entire debt, interest, attorney’s fees, and sheriff’s or constable’s commissions are paid in full. Garnishee should make sure to obtain satisfaction of judgment.
Garnishment FAQ: Multiple Garnishments Generally, garnishments are paid in the order they are served on garnishee, not by date of garnishment judgment. La. R.S. 13:1925(C): Debt to garnishee cannot take preference over enforcement of child support obligation. Debt to employer can sometimes be treated as a prior garnishment
Multiple Garnishments, cont’d. Child support orders, no matter when entered or served, take priority over every garnishment and levy except a federal tax levy served before entry of a child support order. The key date is that of the support order, not the income withholding order. Two or more support orders (either child or spousal) will be prorated up to the legal limits.
Garnishment FAQ: Employee Rights Money paid out on garnishments counts towards the minimum wage requirements under FLSA. Employer may not terminate an employee because of a garnishment. Termination is permitted only if employee actually withholds under three or more garnishments, support orders, or levies within a two- year period. Employer cannot deny employment to a prospective employer because of garnishments.
Garnishment FAQ: Employee Bankruptcy The mere filing of bankruptcy automatically stays any garnishment proceeding against the bankrupt debtor or “property of the estate.” The bankruptcy court will enter an order instructing the employer to stop withholdings. Withholdings for child or spousal support may continue against property that is not property of the estate.
Bankruptcy, cont’d. Chapter 7: Earnings after the filing of the employee’s bankruptcy petition are not property of the bankruptcy estate. Thus, withholding for child or spousal support can continue. Chapter 13: Earnings after the filing of employee’s bankruptcy petition are property of the bankruptcy estate. Thus, the withholding of child or spousal support cannot continue unless and until bankruptcy court issues an order lifting the stay.
Garnishment FAQ: Failure of Garnishee to Withhold or Remit If the judgment creditor suspects he has not been paid in accordance with the garnishment judgment, it will file a rule for an accounting. When creditor does so and establishes he has not been paid in accordance with judgment, burden of proof shifts to the employer to explain its failure. Johnson v. Fulwood, 398 So. 2d 1151 (La. App. 4th Cir. 1981). Court may order garnishee to pay the amounts that should have been withheld from date of garnishment order, and to continue garnishment payments until debt is satisfied. Bank One v. Anima Home Health, 950 So.2d 886.
FAQ: Wrongful Garnishment A judgment creditor who wrongfully garnishes property is answerable in damages to the owner of the property wrongfully seized. Compensable items of damages in such cases include damages for loss of use of the funds seized, inconvenience, mental distress, embarrassment, and injury to reputation. Homemakers Loan & Consumer Discount Co. v. Arthur, 333 So. 2d 686 (La. Ct. App. 4th Cir. 1976).
Garnishment FAQ: Garnishment for Community Debts To the extent that a debtor's community property can be seized in satisfaction of a creditor's judgment, the debtor's spouse's earnings and other property also may be garnished, under appropriate circumstances, based upon the presumption, which is rebuttable, that earnings and property of both spouse are community. The nonparty spouse is arguably entitled to specific notice before execution of the judgment against community property. See, e.g., Jones v. Flowers, 547 U.S. 220, 126 S. Ct. 1708, 1721, 164 L. Ed. 2d 415 (2006), Rayne State Bank and Trust Co. v. Fruge, 546 So. 2d 637 (La. Ct. App. 3d Cir. 1989), writ denied, 551 So. 2d 1319 (La. 1989).
Garnishment FAQ: Wages of Independent Contractor Money owed to an independent contractor may not be “wages” within the meaning of La. R.S. 13:3921. Consequently, the garnishing of money owed to an independent contractor is not continuing and is effective only as to money owed at the moment of service on the garnishee. Tower Credit, Inc. v. Carpenter, 825 So. 2d 1125 (La. 2002). The distinction between employee and independent contractor status is a factual determination to be decided on a case-by-case basis.
Helpful Legal References La. R.S. 13:3881 (exemptions from seizure and disposable earnings) La. R.S. 13: (garnishment procedures) La. C.C.P. arts (more garnishment procedures) La. Children’s Code arts (Uniform Interstate Family Support Act) La. R.S. 23:1205 (workers comp. exempt) La. R.S. 23:731 (prohibiting termination of employees for garnishments) La. R.S. 47:1570 (tax levies) La. R.S. 46:236.3 (income assignment for support orders) La. R.S. 22: 646 (disability payments and garnishment)
Contact Information Lindsey Hunter Civil Division Post Office Box Baton Rouge, Louisiana Phone: (225)