Georgia garnishment law faces court scrutiny

At issue: Safeguards for protecting consumers from having money improperly seized

How garnishments work

  • To collect money owed to them, most creditors must first file a lawsuit. The debtor may be served with a copy of the lawsuit, but if creditors don't have a current address, the debtor can be notified only by a legal notice in a newspaper.
  • If the debtor doesn't answer the lawsuit within 30 days, the creditor gets an automatic judgment. Then the creditor can file a new legal action against a debtor's employer or the debtor's bank to collect the money. But some money, such as Social Security, veterans benefits, workers' compensation and welfare payments, is protected from garnishment. If a paycheck is garnished, no more than 25 percent of it can be taken.
  • To dispute a garnishment after being notified of it, the debtor has a period of time to file what's called a Traverse. That's a legal document filed with the clerk of court contesting the facts in the garnishment or arguing that the money seized is exempt. That doesn't stop the garnishment, but it triggers a hearing within 10 days of its filing. However, the debtor's account is still frozen until the court makes a decision on the case.

Gwinnett leads on garnishments

Gwinnett County is apparently a favorite of creditors when it comes to filing garnishments. Last year, 37 percent of all garnishments in Georgia were filed in Gwinnett County, according to numbers kept by the state’s Administrative Office of the Courts. That’s far and away the most of any county.

Every year since 2010, at least 20 percent of the garnishments statewide were handled in Gwinnett.

Richard Howe, managing partner of the debt collection law firm Howe & Associates, said Gwinnett is more efficient than its neighbors, has an easy-to-use online system and slightly lower fees than other counties. Additionally, one of the largest registered agents in the country — Corporation Service Co. — has local offices in Gwinnett. Because garnishments must be filed where the registered agent is housed, its presence likely has a significant impact on the numbers.

Clerk of Courts Richard Alexander said Gwinnett handled about 25,000 garnishments through October of this year.

As Tony Strickland battled cancer, he fell behind on bills. His bad luck continued a few years later, when he was injured at work and became permanently disabled. He and his wife scraped by on Social Security disability payments and his workers’ compensation settlement.

Then, in 2012, a creditor obtained a judgment against him for his past-due credit card bill. Strickland was locked out of the bank account with his settlement funds, even though federal and state law exempt those, as well as Social Security payments, from garnishment. He appealed, but for months he had no access to the money.

He couldn’t afford his heart medicine and delayed a doctor’s visit for a blood clot in his hand until his arm turned black.

Now, Strickland’s case could trigger an examination of whether Georgia’s garnishment law violates both the state and federal constitutions because it fails to protect people from losing their property without due process of law. If the state’s garnishment laws are determined to be in violation, the implications could be huge. Consumer advocates say it could mean a halt to all garnishment filings in the state until lawmakers rewrite the rules.

Even though Strickland eventually got his money back, at issue are the speed of undoing improper garnishments and whether creditors have to inform people about what money is exempt. Attorneys with Atlanta Legal Aid, who filed a lawsuit on his behalf, argued that creditors could come after his bank accounts again, and by the time his case could be heard and decided in court, he would again be deprived of his meager income.

“If property is taken erroneously, there should be a mechanism to undo that harm as quickly as possible,” said Erik Heath, the Legal Aid attorney representing Strickland. “That garnishment starts to inflict a hardship quickly.”

In a November ruling, the U.S. 11th Circuit of Appeals overturned a lower court decision dismissing the lawsuit.

“We cannot count on the creditor and the bank to have learned their lessons that the Stricklands’ funds are exempt,” the ruling says.

The judges also said it was reasonable to reconsider the constitutionality of Georgia’s law. They did not rule on that issue, instead remanding the case to federal district court for a full hearing.

"We think that development of the constitutional issue would benefit from Georgia's Attorney General's involvement, should he elect to participate in the proceedings," the judges wrote.

Lauren Kane, a spokeswoman for Attorney General Sam Olens, said in an email that the office is “reviewing the decision” but has not yet decided whether to take a role in the case.

Pattern of abuse

Improper garnishments have been an issue nationwide for years. Margo Saunders, an attorney with the National Consumer Law Center, said she hears about hundreds of cases a year, particularly involving Social Security. Most people don’t have access to an attorney who can help them prove their money is exempt from garnishment, or don’t know that it is exempt in the first place. For that reason, Saunders said, improper garnishment cases often don’t make it to court.

Heath said Georgia’s process, which freezes accounts for 30 days before the money is sent to the court, is “harsher” than those of other states.

New York and Connecticut have laws that keep entire accounts from being frozen, so people still have access to some money. Other states have amended court forms so garnishments are ineffective against bank accounts that only contain Social Security money.

When those had a limited impact, the Treasury department instituted a new rule last year that automatically protected the last two months' worth of directly deposited federal benefits from being garnished.

That still leaves workers’ compensation and other exempt funds vulnerable, though. Even if the bank garnishment is eventually unwound, elderly and disabled people can be left in extreme hardship.

“If you haven’t paid, it’s unlikely you can afford to lose the money in your bank account,” Saunders said. “The idea that you’ve got your money where you think it will be safe and it’s not, it’s pretty scary.”

Saunders said Georgia's law is "unconstitutional on its face" and that the 11th Circuit's ruling could have implications beyond Georgia.

“Potentially, it could set the stage for a review of many garnishment statutes, or at least practices,” she said. “It depends on how far they go. It could be a big deal, but it’s not a big deal yet.”

Bill Custer, a partner at the law firm Bryan Cave, which represents creditors, disagrees. While it’s clear that the judges find the question interesting, he said, “that’s a far cry from declaring it unconstitutional.”

Custer said he does not think the person requesting the garnishment should have to provide information about exemptions or how to challenge the garnishment, one of the claims made by debtors’ attorneys. He also said any issue with the speed of undoing improper garnishments is a reflection of the way the courts operate, not of the law itself.

“The wheels of justice do not move that fast,” he said.

Gwinnett court clerk responsible

Though Strickland lives in Atlanta, the garnishment against him was filed in Gwinnett County and Clerk of Courts Richard Alexander was a defendant in Strickland’s appeal.

His office sent the garnishment notice to Strickland’s bank, and the 11th Circuit said that by carrying out his duties, Alexander was responsible for the fact that Strickland lost access to his money and could lose it in future garnishments.

“Strickland’s injury is fairly traceable to Alexander’s conduct,” the court said.

At the same time, the court said it was not Alexander’s job to defend the constitutionality of the state law. And while the notice that Alexander’s office sent to the bank didn’t include what kinds of funds are exempt, state law doesn’t require such information, it noted.

Alexander said he could not comment on pending litigation.

David Addleton, a Macon attorney who is the chair of the Georgia chapter of the National Association of Consumer Advocates, called the whole system antiquated. The process favors creditors, who have deep pockets and the time to press a case, over those who may not even know they have a rightful claim to their own money, he said.

Strickland now suffers from bladder cancer and staggers when he walks, the result of several mini-strokes. His wife, Lynn, said the couple has never had a lot of money, but during the garnishment, they could not afford to buy groceries and depended on their children to pay for medical expenses.

She hopes the suit will ensure that her family and others will no longer be thrust into that situation.

“I do worry about it still, especially when the postman comes. It brings back memories of that day,” she said. “We were stressed, really stressed. I just didn’t know what to do.”