UNDERSTANDINGUNDERSTANDINGGARNISHMENTSGARNISHMENTS

Government Finance Officers Government Finance Officers

Association of Louisiana Association of Louisiana

October 8, 2014October 8, 2014

Presented by:Presented by: Rick McGimsey &Rick McGimsey &

Lindsey Hunter Lindsey Hunter

What is a garnishment?What is a garnishment?

A garnishment is a judicial proceeding A garnishment is a judicial proceeding in which a creditor asks the court to in which a creditor asks the court to order a third party who is indebted to order a third party who is indebted to the debtor to turn over to the creditor the debtor to turn over to the creditor any of the debtor's property held by that any of the debtor's property held by that third party.third party.

Waiver of ImmunityWaiver of Immunity

The State of Louisiana expressly waives any The State of Louisiana expressly waives any immunity from suit insofar as the garnishment immunity from suit insofar as the garnishment of nonexempt portion of wages, salaries, of nonexempt portion of wages, salaries, commissions, or other compensation of public commissions, or other compensation of public officials, whether elected or appointed, public officials, whether elected or appointed, public employees, or contractors is concerned, of employees, or contractors is concerned, of itself, its agencies, boards, commissions, itself, its agencies, boards, commissions, political subdivisions, public corporations, and political subdivisions, public corporations, and municipal corporations. La. R.S. 13:3881(C).municipal corporations. La. R.S. 13:3881(C).

How Does a Garnishment How Does a Garnishment Commence?Commence?

After getting a money judgment against a defendant, the plaintiff, After getting a money judgment against a defendant, the plaintiff, i.e.,i.e., now the judgment or seizing creditor, obtains a writ of fieri now the judgment or seizing creditor, obtains a writ of fieri facias (“fifa”) from the court. facias (“fifa”) from the court.

The judgment creditor then petitions the court for garnishment of The judgment creditor then petitions the court for garnishment of the defendant’s wages. Written notice must be sent to judgment the defendant’s wages. Written notice must be sent to judgment debtor by creditor. debtor by creditor.

The judgment creditor asks that the defendant’s employer be cited The judgment creditor asks that the defendant’s employer be cited as garnishee and answer garnishment interrogatories under oath.as garnishee and answer garnishment interrogatories under oath.

The judgment creditor shall send to the judgment debtor written The judgment creditor shall send to the judgment debtor written notice of the filing of the garnishment petition by mail or electronic notice of the filing of the garnishment petition by mail or electronic means. La. C.C.P. art. 2412. means. La. C.C.P. art. 2412.

Proper Service for State Proper Service for State

Employees: La. C.C.P. art. 2412Employees: La. C.C.P. art. 2412 Service of garnishment petitions against wages, salaries, Service of garnishment petitions against wages, salaries,

or commissions of employees employed within the or commissions of employees employed within the executive branch of state government shall be made executive branch of state government shall be made in the following manner:in the following manner:

(1)(1) For employees paid through the statewide uniform For employees paid through the statewide uniform payroll of the division of administration, service shall payroll of the division of administration, service shall be made on said office.be made on said office.

(2)(2) For all other employees not covered by (1), service For all other employees not covered by (1), service shall be made only on the secretary of the shall be made only on the secretary of the department employing the debtor or on his designee.department employing the debtor or on his designee.

Effect of Service Effect of Service

Employer should begin withholding from date Employer should begin withholding from date of service.of service.

Employer has 15 days from date of service to Employer has 15 days from date of service to prepare and file sworn answers to the prepare and file sworn answers to the interrogatories.interrogatories. Failure to answer under oath treated as failure to Failure to answer under oath treated as failure to

answeranswer Examples of interrogatoriesExamples of interrogatories Court must grant leave to amend answer to Court must grant leave to amend answer to

interrogatoriesinterrogatories

3 Options After Petition & 3 Options After Petition & Interrogatories are Served Interrogatories are Served

OPTION ONE: Garnishee files sworn answer & court OPTION ONE: Garnishee files sworn answer & court issues garnishment judgment. Hearing is not issues garnishment judgment. Hearing is not necessary. Judgment is served on garnishee.necessary. Judgment is served on garnishee.

- 180 days to obtain judgment from filing of answer180 days to obtain judgment from filing of answer- Judgment for employees paid on commission basis: La. Judgment for employees paid on commission basis: La.

R.S. 13:3926R.S. 13:3926

Judgment should allow employer to deduct $3/pay Judgment should allow employer to deduct $3/pay period from non-exempt portion of wages (i.e., period from non-exempt portion of wages (i.e., 25% being withheld) to cover costs.25% being withheld) to cover costs.

Judgment might allow $15 to be withdrawn from Judgment might allow $15 to be withdrawn from court for answering if attorney files answercourt for answering if attorney files answer

Option 2: No Answer Option 2: No Answer Filed; Judgment Pro Filed; Judgment Pro ConfessoConfesso

If the garnishee fails to answer timely, the If the garnishee fails to answer timely, the seizing creditor may move for a seizing creditor may move for a judgment judgment pro confessopro confesso, i.e., a judgment against the , i.e., a judgment against the garnishee for the amount of the judgment. garnishee for the amount of the judgment.

Contradictory hearing must be held on motionContradictory hearing must be held on motion Judgment must be rendered after hearing unless Judgment must be rendered after hearing unless

garnishee proves he has no property of debtorgarnishee proves he has no property of debtor Costs & attorney’s fees associated with motion Costs & attorney’s fees associated with motion

awarded to creditor regardless of outcomeawarded to creditor regardless of outcome

Option 3: Rule to Option 3: Rule to Traverse-La. C.C.P. art. Traverse-La. C.C.P. art. 24142414

Creditor may file contradictory rule to Creditor may file contradictory rule to traverse garnishee’s answerstraverse garnishee’s answers 15 days from date of service of notice of 15 days from date of service of notice of

filing garnishee’s answersfiling garnishee’s answers Creditor must disprove garnishee’s answersCreditor must disprove garnishee’s answers If answers are filed and creditor fails to If answers are filed and creditor fails to

traverse them, any property other than that traverse them, any property other than that admitted in answer is released from seizure. admitted in answer is released from seizure.

Remit $$ to SheriffRemit $$ to Sheriff

After the garnishee knows the proper amount After the garnishee knows the proper amount to remit, it should send that money to sheriff to remit, it should send that money to sheriff each pay period.each pay period.

6% commission for constable is permitted by 6% commission for constable is permitted by 33:1428(A)(7)(a) to be paid by plaintiff in writ. 33:1428(A)(7)(a) to be paid by plaintiff in writ. Tucker v. FowlerTucker v. Fowler, 95-1649 (La. 2/28/96), 668 , 95-1649 (La. 2/28/96), 668 So. 2d 718.So. 2d 718. Sheriff gets 6% even if judgment orders funds paid Sheriff gets 6% even if judgment orders funds paid

directly to seizing creditor. directly to seizing creditor. Stevens v. LockettStevens v. Lockett, 528 , 528 So. 2d 689 (La. App. 2 Cir. 5/4/1988).So. 2d 689 (La. App. 2 Cir. 5/4/1988).

How Much Money Does How Much Money Does Garnishee Withhold?Garnishee Withhold?

In every garnishment, “a judgment shall be rendered by the In every garnishment, “a judgment shall be rendered by the court of competent jurisdiction in which the garnishment court of competent jurisdiction in which the garnishment proceedings may be pending fixing the portion of such proceedings may be pending fixing the portion of such wage, salary, commission, or other compensation as may wage, salary, commission, or other compensation as may be exempt, as provided by law, and providing for the be exempt, as provided by law, and providing for the payment to the seizing creditor of whatever sum for which payment to the seizing creditor of whatever sum for which judgment may be obtained, out of the portion of such judgment may be obtained, out of the portion of such compensation which is not exempt.” La. R.S. 13:3921(A).compensation which is not exempt.” La. R.S. 13:3921(A).

Only 25% of “disposable earnings” may be withheld from each Only 25% of “disposable earnings” may be withheld from each paycheck.paycheck. Exception for child or spousal support ordersException for child or spousal support orders Exception for IRS lienException for IRS lien 30 x federal minimum wage exception30 x federal minimum wage exception

Disposable EarningsDisposable Earnings

Disposable earnings are the part of the Disposable earnings are the part of the earnings of any individual remaining after the earnings of any individual remaining after the deduction of any amounts required by law to deduction of any amounts required by law to be withheld and those amounts that are be withheld and those amounts that are reasonable and are being deducted in the reasonable and are being deducted in the usual course of business at the time the usual course of business at the time the garnishment is served upon the employer.garnishment is served upon the employer. 25% of disposable earnings may be garnished25% of disposable earnings may be garnished Employee must always be left with Employee must always be left with weekly weekly pay of pay of

30x federal minimum wage (30 X $7.25 = $217.50)30x federal minimum wage (30 X $7.25 = $217.50)

Example 1: Weekly Example 1: Weekly Wages Wages Creditor GarnishmentCreditor Garnishment

DISPOS. EARN. NET PAYDISPOS. EARN. NET PAYGROSS PAYGROSS PAY $900 $900- Soc. Sec/MedicareSoc. Sec/Medicare - 50 - 50- Federal Income TaxFederal Income Tax - 140 - 140- State Income Tax State Income Tax - 30 - 30- Medical InsuranceMedical Insurance - 25 - 25- Life InsuranceLife Insurance - 10 - 10- RetirementRetirement - 25 - 25- Credit Union Credit Union -50-50

$ 620$ 620 $ 570 $ 570

25% Garnishment25% Garnishment - 155 - 155 _________ _________ Employee keepsEmployee keeps $465 $465

Example 2: Weekly Example 2: Weekly WagesWagesCreditor GarnishmentCreditor Garnishment

DISPOS. EARN.DISPOS. EARN. NET PAY NET PAY Gross PayGross Pay $350 $350

Soc. Sec./MedicareSoc. Sec./Medicare -20 -20 Federal Income TaxFederal Income Tax -30 -30 State Income TaxState Income Tax -10 -10 Medical InsuranceMedical Insurance -25 -25 Life InsuranceLife Insurance -10 -10 RetirementRetirement -25 -25 Credit UnionCredit Union -50 -50

$230 $230 $180$18025% Garnishment25% Garnishment - 57.50- 57.50Employee keeps??Employee keeps?? $172.50 $172.50**** (continued)(continued)

Example Two, cont’d.Example Two, cont’d.

DISPOS. EARN.DISPOS. EARN. NET PAY NET PAY

$230$230 $180$18025% Garnishment25% Garnishment - 57.5 - 57.5 Employee keeps??Employee keeps?? $172.50 $172.50****

****But federal law requires that employee always keep But federal law requires that employee always keep $217.50 per week (30 x federal minimum wage)$217.50 per week (30 x federal minimum wage)

DISPOS. EARN.DISPOS. EARN. NET PAY NET PAY

$ 230 $ 230 $180$180Employee keeps Employee keeps -217.50 -217.50 Garnishment paymentGarnishment payment $ 12.50/wk $ 12.50/wk

Are Disability Payments Are Disability Payments Earnings?Earnings?

Disability paymentsDisability payments ARE earnings if ARE earnings if made pursuant to a contract of health, made pursuant to a contract of health, accident or life insurance. In this case, accident or life insurance. In this case, they are EXEMPT.they are EXEMPT.

Disability paymentsDisability payments simply made by simply made by employer and not pursuant to insurance employer and not pursuant to insurance policy are NOT EXEMPT.policy are NOT EXEMPT.

Are Workers’ Compensation Are Workers’ Compensation Payments Earnings?Payments Earnings?

Workers’ Compensation payments are exempt Workers’ Compensation payments are exempt from all claims of creditors and from levy or from all claims of creditors and from levy or execution or attachment or garnishment, execution or attachment or garnishment, except under a judgment for alimony in favor of except under a judgment for alimony in favor of a wife, or an ascendant or descendant. La. a wife, or an ascendant or descendant. La. R.S. 23:1205.R.S. 23:1205.

LA courts have interpreted this provision as LA courts have interpreted this provision as applying to benefits due, not benefits received.applying to benefits due, not benefits received.

Are Retirement Benefits Are Retirement Benefits Earnings?Earnings?

La. R.S. 11:405: An annuity, retirement La. R.S. 11:405: An annuity, retirement allowance or benefit, or refund of allowance or benefit, or refund of contributions, or any optional benefit paid contributions, or any optional benefit paid to any person . . . is exempt from to any person . . . is exempt from garnishment.garnishment. Exception: retirement benefits may be Exception: retirement benefits may be

garnished to pay support judgments. La. garnished to pay support judgments. La. R.S. 11:292.R.S. 11:292.

Satisfaction of Satisfaction of GarnishmentGarnishment

Garnishment continues until entire Garnishment continues until entire debt, interest, attorney’s fees, and debt, interest, attorney’s fees, and sheriff’s or constable’s commissions sheriff’s or constable’s commissions are paid in full.are paid in full.

Garnishee should make sure to Garnishee should make sure to obtain satisfaction of judgment.obtain satisfaction of judgment.

Garnishment FAQ: Garnishment FAQ: Multiple GarnishmentsMultiple Garnishments

Generally, garnishments are paid in the Generally, garnishments are paid in the order they are order they are servedserved on garnishee, not on garnishee, not by date of garnishment judgment.by date of garnishment judgment. La. R.S. 13:1925(C): Debt to garnishee La. R.S. 13:1925(C): Debt to garnishee

cannot take preference over enforcement of cannot take preference over enforcement of child support obligation.child support obligation.

Debt to employer can sometimes be Debt to employer can sometimes be treated as a prior garnishment treated as a prior garnishment

Multiple Garnishments, Multiple Garnishments, cont’d.cont’d.

Child support orders, no matter when entered Child support orders, no matter when entered or served, take priority over every garnishment or served, take priority over every garnishment and levy except a federal tax levy served and levy except a federal tax levy served before entry of a child support order. The key before entry of a child support order. The key date is that of the support order, not the date is that of the support order, not the income withholding order.income withholding order.

Two or more support orders (either child or Two or more support orders (either child or spousal) will be prorated up to the legal limits.spousal) will be prorated up to the legal limits.

Garnishment FAQ:Garnishment FAQ:Employee RightsEmployee Rights

Money paid out on garnishments counts towards the Money paid out on garnishments counts towards the minimum wage requirements under FLSA. minimum wage requirements under FLSA.

Employer may not terminate an employee because of a Employer may not terminate an employee because of a garnishment. Termination is permitted only if garnishment. Termination is permitted only if employee actually withholds under three or more employee actually withholds under three or more garnishments, support orders, or levies within a two-garnishments, support orders, or levies within a two-year period.year period.

Employer cannot deny employment to a prospective Employer cannot deny employment to a prospective employer because of garnishments.employer because of garnishments.

Garnishment FAQ:Garnishment FAQ:Employee BankruptcyEmployee Bankruptcy

The mere filing of bankruptcy automatically The mere filing of bankruptcy automatically stays any garnishment proceeding against the stays any garnishment proceeding against the bankrupt debtor or “property of the estate.”bankrupt debtor or “property of the estate.”

The bankruptcy court will enter an order The bankruptcy court will enter an order instructing the employer to stop withholdings.instructing the employer to stop withholdings.

Withholdings for child or spousal support may Withholdings for child or spousal support may continue against property that is not property of continue against property that is not property of the estate.the estate.

Bankruptcy, cont’d.Bankruptcy, cont’d.

Chapter 7: Earnings after the filing of the Chapter 7: Earnings after the filing of the employee’s bankruptcy petition are employee’s bankruptcy petition are notnot property of the bankruptcy estate. Thus, property of the bankruptcy estate. Thus, withholding for child or spousal support can withholding for child or spousal support can continue.continue.

Chapter 13: Earnings after the filing of Chapter 13: Earnings after the filing of employee’s bankruptcy petition are property of employee’s bankruptcy petition are property of the bankruptcy estate. Thus, the withholding of the bankruptcy estate. Thus, the withholding of child or spousal support cannot continue child or spousal support cannot continue unless and until bankruptcy court issues an unless and until bankruptcy court issues an order lifting the stay.order lifting the stay.

Garnishment FAQ:Garnishment FAQ:Failure of Garnishee to Failure of Garnishee to Withhold or RemitWithhold or Remit

If the judgment creditor suspects he has not been paid If the judgment creditor suspects he has not been paid in accordance with the garnishment judgment, it will file in accordance with the garnishment judgment, it will file a rule for an accounting. When creditor does so and a rule for an accounting. When creditor does so and establishes he has not been paid in accordance with establishes he has not been paid in accordance with judgment, burden of proof shifts to the employer to judgment, burden of proof shifts to the employer to explain its failure. explain its failure. Johnson v. FulwoodJohnson v. Fulwood, 398 So. 2d , 398 So. 2d 1151 (La. App. 4th Cir. 1981).1151 (La. App. 4th Cir. 1981).

Court may order garnishee to pay the amounts that Court may order garnishee to pay the amounts that should have been withheld from date of garnishment should have been withheld from date of garnishment order, and to continue garnishment payments until debt order, and to continue garnishment payments until debt is satisfied. is satisfied. Bank One v. Anima Home Health, Bank One v. Anima Home Health, 950 950 So.2d 886.So.2d 886.

FAQ: Wrongful FAQ: Wrongful GarnishmentGarnishment

A judgment creditor who wrongfully garnishes A judgment creditor who wrongfully garnishes property is answerable in damages to the property is answerable in damages to the owner of the property wrongfully seized. owner of the property wrongfully seized.

Compensable items of damages in such cases Compensable items of damages in such cases include damages for loss of use of the funds include damages for loss of use of the funds seized, inconvenience, mental distress, seized, inconvenience, mental distress, embarrassment, and injury to reputation. embarrassment, and injury to reputation. Homemakers Loan & Consumer Discount Co. Homemakers Loan & Consumer Discount Co. v. Arthurv. Arthur, 333 So. 2d 686 (La. Ct. App. 4th Cir. , 333 So. 2d 686 (La. Ct. App. 4th Cir. 1976).1976).

Garnishment FAQ: Garnishment FAQ: Garnishment for Community Garnishment for Community DebtsDebts

To the extent that a debtor's community property can To the extent that a debtor's community property can be seized in satisfaction of a creditor's judgment, the be seized in satisfaction of a creditor's judgment, the debtor's spouse's earnings and other property also debtor's spouse's earnings and other property also may be garnished, under appropriate circumstances, may be garnished, under appropriate circumstances, based upon the presumption, which is rebuttable, that based upon the presumption, which is rebuttable, that earnings and property of both spouse are community. earnings and property of both spouse are community.

The nonparty spouse is arguably entitled to specific The nonparty spouse is arguably entitled to specific notice before execution of the judgment against notice before execution of the judgment against community property. community property. See, e.g., Jones v. FlowersSee, e.g., Jones v. Flowers, 547 , 547 U.S. 220, 126 S. Ct. 1708, 1721, 164 L. Ed. 2d 415 U.S. 220, 126 S. Ct. 1708, 1721, 164 L. Ed. 2d 415 (2006), (2006), Rayne State Bank and Trust Co. v. FrugeRayne State Bank and Trust Co. v. Fruge, 546 , 546 So. 2d 637 (La. Ct. App. 3d Cir. 1989), So. 2d 637 (La. Ct. App. 3d Cir. 1989), writ deniedwrit denied, 551 , 551 So. 2d 1319 (La. 1989).So. 2d 1319 (La. 1989).

Garnishment FAQ:Garnishment FAQ:Wages of Independent Wages of Independent ContractorContractor

Money owed to an independent contractor may not be Money owed to an independent contractor may not be “wages” within the meaning of La. R.S. 13:3921. “wages” within the meaning of La. R.S. 13:3921. Consequently, the garnishing of money owed to an Consequently, the garnishing of money owed to an independent contractor is not continuing and is independent contractor is not continuing and is effective only as to money owed at the moment of effective only as to money owed at the moment of service on the garnishee. service on the garnishee. Tower Credit, Inc. v. Tower Credit, Inc. v. CarpenterCarpenter, 825 So. 2d 1125 (La. 2002). , 825 So. 2d 1125 (La. 2002).

The distinction between employee and independent The distinction between employee and independent contractor status is a factual determination to be contractor status is a factual determination to be decided on a case-by-case basis.decided on a case-by-case basis.

Helpful Legal ReferencesHelpful Legal References

La. R.S. 13:3881 (exemptions from seizure and disposable La. R.S. 13:3881 (exemptions from seizure and disposable earnings)earnings)

La. R.S. 13:3921-3928 (garnishment procedures)La. R.S. 13:3921-3928 (garnishment procedures) La. C.C.P. arts. 2411-2417 (more garnishment procedures)La. C.C.P. arts. 2411-2417 (more garnishment procedures) La. Children’s Code arts. 1301-1308 (Uniform Interstate Family La. Children’s Code arts. 1301-1308 (Uniform Interstate Family

Support Act)Support Act) La. R.S. 23:1205 (workers comp. exempt)La. R.S. 23:1205 (workers comp. exempt) La. R.S. 23:731 (prohibiting termination of employees for La. R.S. 23:731 (prohibiting termination of employees for

garnishments)garnishments) La. R.S. 47:1570 (tax levies)La. R.S. 47:1570 (tax levies) La. R.S. 46:236.3 (income assignment for support orders)La. R.S. 46:236.3 (income assignment for support orders) La. R.S. 22: 646 (disability payments and garnishment)La. R.S. 22: 646 (disability payments and garnishment)

Contact InformationContact Information

Lindsey HunterLindsey Hunter

Civil DivisionCivil Division

Post Office Box 94005Post Office Box 94005

Baton Rouge, Louisiana 70804Baton Rouge, Louisiana 70804

HunterL@ag.state.la.usHunterL@ag.state.la.us

Phone: (225) 326-6083Phone: (225) 326-6083