Garnish at your own Risk!

Posted by Charles H. Van Horn on

Earlier this week, Judge Marvin Shoob of the United States District Court for the Northern District of Georgia issued a Ruling declaring Georgia’s post-judgment garnishment statute unconstitutional.

Prior to September 8, 2015, Georgia’s post-judgment garnishment statute (O.C.G.A. § 18-4-60 et seq.) provided judgment creditors the right to file a garnishment action against third parties to seize money or property owed to them, such as employee earnings and funds held in financial accounts. Judge Shoob found that the Statute lacks necessary due process safeguards for judgment debtors, specifically with regard to providing notice to the judgment debtor of exemptions available under Georgia law and the procedure to claim those exemptions. The Judge also found that the Statute fails to provide a timely procedure for resolving a judgment debtor’s exemption claims.

So, what does this mean? For starters, garnishment actions filed in Georgia will likely face heightened scrutiny by Georgia courts – and greater opposition from opposing parties.  This Ruling does not appear to apply to garnishments where the debtor is a corporation or other entity (because personal exemptions are inapplicable). However, the Ruling is silent on this issue at this time. Therefore, challenges to garnishments may lie ahead. Or in other words, garnish at your own risk!

With this Ruling in mind, judgment creditors should discuss future collections strategies with counsel and consider revising their standard forms and processes. This may require revising or supplementing the standard forms used in garnishment proceedings, including those provided by the courts and amending the notice to the debtor to identify the exemption process.

Although the Ruling will likely be appealed, and its immediate effect may not be fully known until the dust settles, judgment creditors should be wary of proceeding with garnishment actions without reviewing and revising their practices in light of the Ruling.

As always, if you have any questions about the Ruling’s impact on your business, please contact us.

A copy of the Ruling can be found here.