Many, if not most, of the lenders who are reading this article have probably responded to one or more garnishments in their career. Many lenders see these collection tools as an administrative burden to respond to – and a burden they are not adequately compensated for with the nominal $15.00 fee that must be served with the garnishment pleadings. That said, lenders should take seriously their responsibility to timely respond to these garnishments since the failure to do so can have serious financial consequences for a lending institution.
Garnishments are frequently utilized by a party who has obtained a judgment against that party’s debtor. Once a judgment is entered in favor of a creditor and against a debtor, the creditor becomes a “judgment creditor” and the debtor becomes a “judgment debtor.” The judgment creditor will then typically investigate and pursue assets owned by the judgment debtor to satisfy the judgment.
One of the easiest and most cost-effective ways to collect on a judgment is to garnish funds in a judgment debtor’s bank account. When funds are garnished, they are frozen and can be seized by the judgment creditor in partial or full satisfaction of the judgment entered against the judgment debtor. Instead of seizing machinery, equipment, or livestock owned by a judgment debtor—which can be both expensive and a hassle to physically seize, store, and thereafter liquidate—it is far more convenient and typically less expensive to simply go after the cash in that judgment debtor’s bank account.
The typical situation that Minnesota-based lenders may encounter involves a judgment creditor serving a “Garnishment Summons,” a “Nonearnings Disclosure Form,” and an “Important Notice” and “Instructions” form directed to the judgment debtor. One goal of this article is to highlight the importance of the “Garnishment Summons” directed to the lender receiving the garnishment pleadings (i.e., the “garnishee”). The “Garnishment Summons” is important because that pleading may be served by “certified mail, return receipt requested” in addition to personal service. Minn. Stat. § 571.72, subd. 2. Once the “Garnishment Summons” is served upon the “garnishee” lender, the district court identified on the caption of that pleading obtains personal jurisdiction over the garnishee lender. It is, therefore, very important that anyone who signs a receipt for certified mail to ensure these garnishment pleadings are delivered to the appropriate person at the lending institution to ensure the garnishee timely responds to the garnishment.
If, as is the case with most lenders responding to a garnishment, the garnished assets are “any indebtedness, money, or property other than earnings[,]” then the “garnishee” lender must provide “a written disclosure, of the garnishee’s indebtedness, money, or other property owing to the debtor” within twenty (20) days after the garnishment summons is served. Minn. Stat. § 571.72, subd. 2(3) (emphasis added). Responding to the garnishment pleadings in both an accurate and timely manner is critical because if a garnishee fails to complete and serve a disclosure as required by Minnesota law, then “the court may render judgment against the garnishee, upon motion by the creditor, for an amount not exceeding 110 percent of the amount claimed in the garnishment summons.” Minn. Stat. § 571.82, subd. 1 (emphasis added). While it may not be common for a court to enter judgment against a garnishee who fails to respond to a garnishment summons, the author of this article has seen it happen.
Thus, the “takeaway” for this article is that if you are a “garnishee” lender—or any “garnishee” for that matter—be sure you timely and accurately respond to garnishment pleadings within the statutory deadline for doing so. A garnishee should never fail to respond to garnishment pleadings because failing to complete and serve the required disclosure may result in judgment being entered against that garnishee for up to 110% of someone else’s judgment debt.
