Patrick Brugger, partner with Shutts & Bowen in Miami.
With the passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, millions of Americans, many of whom are judgment debtors, will be receiving “economic impact payments” from the Department of the Treasury. Those payments range from $1,200 for qualifying individuals or head of household filers, to $2,400 for married filing jointly, plus $500 per child. Other than constraints on collection of debts owed to state and federal governments, there is nothing in the CARES Act that makes the payments exempt or otherwise protected from garnishment. As Sens. Sherrod Brown and Josh Hawley expressed in an April 9 letter to the Department of the Treasury, “the CARES Act direct payments are at risk of being seized by debt collectors” unless further action is taken. With many of the economic impact payments being paid via direct deposit this week, some are bracing for an uptick in service of writs of garnishment.
The Garnishment Process
A writ of garnishment is a device often employed by creditors to collect on judgments. It works like this: the creditor (called the garnishor) identifies a third party (the garnishee) that might be holding money or property belonging to the debtor. The garnishor then applies to the clerk for the issuance of a writ of garnishment. Once issued by the clerk, the garnishor serves the writ upon the garnishee. Within 20 days of service, the garnishee must serve an answer to the writ indicating whether it holds any money or property belonging to the debtor. If so, the garnishee must hold the money or property and continue holding it until either the writ is dissolved or the court otherwise enters an order directing disposition after the garnishee and debtor fight over entitlement thereto. The garnishee is merely a neutral stakeholder. Furthermore, if a garnishee is in good faith doubt as to whether money should be held, the garnishment statute encourages them to err on the side of holding. However, some regulations prohibit financial institutions from holding certain funds.
