Businesses, employers, individuals, and attorneys throughout the state have faced legal uncertainty since September 8, 2015, when U.S. District Court Judge Marvin Shoob declared Georgia’s garnishment statute unconstitutional. Recent developments have provided more clarity for employers regarding wage garnishments, but banks served with account garnishments remain in legal limbo.
If a party has sued and won a final judgment, Georgia law allows the bank account, wages, or other funds of a judgment debtor to be garnished to collect on that judgment. The law treats financial accounts and wages differently, but each may be garnished. The law also exempts some sources of funds from garnishment, like worker’s compensation benefits, and in wage garnishments, limits the percentage of funds that may be taken.
Financial institutions typically put safeguards in place so they will not take exempt funds by mistake. In the case before Judge Shoob, the safeguards did not work properly. The debtor’s account was frozen and his worker’s compensation benefits were paid into the Court to satisfy his debt. Wages were not at issue.
The debtor sued the Clerk of the State Court of Gwinnett County, where the garnishment action was filed, alleging that Georgia’s garnishment statute is unconstitutional. Judge Shoob agreed, finding that the statute does not give judgment debtors notice of their entitlement to exemptions, does not require debtors be notified of how to claim an exemption, and does not provide a quick procedure for determining exemption claims.
In his order, Judge Shoob prohibited the State Court Clerk of Gwinnett County from issuing any summons of garnishment inconsistent with the ruling. Court clerks around the state reacted. Some stopped issuing all summons of garnishment and returned checks sent by employers and financial institutions answering garnishments. The Chatham County Magistrate Court issued a standing order to stay garnishment cases on September 15, 2015.
The State Court Clerk of Gwinnett County asked Judge Shoob to limit or clarify his ruling so that the Clerk (and everyone concerned around the state) would understand whether it applied to financial account garnishments only, or if it also applied to wage garnishments. On October 5, 2015, Judge Shoob clarified his earlier order, noting that it did not apply to wage garnishments – those typically directed towards an employer – but that it applied only to a “financial institution holding a judgment debtor’s property under a deposit agreement or account.”
Since Judge Shoob’s clarifying order, the Gwinnett County Clerk’s office, and other Clerk’s offices around the state, have begun issuing summons for wage garnishments and accepting funds in wage garnishment cases. The stay on financial account garnishments, however, remains. On October 7, 2015, the Chatham County Magistrate Court issued an order noting Judge Shoob’s modified order and directing the Clerk to accept garnishments filed against financial institutions, “but shall withhold the issuances of all Summons and Notices on said affected cases until further Order of this Court.” In other words, it appears that the Court will wait until the question of the constitutionality of Georgia’s garnishment statute as applied to financial accounts is resolved before issuing summons in those cases. The Court also specifically noted that “all other garnishments shall be allowed to proceed,” which includes wage garnishments.
The constitutionality of Georgia’s garnishment statute, as applied to financial accounts, will either be resolved through appeals of Judge Shoob’s order, as modified, or through the Georgia General Assembly. In the meantime, Clerk’s offices in Georgia’s 159 counties have taken varying approaches to the situation. Attorneys and businesses that deal with garnishments need to clarify the approach taken by the courts and clerks in each county in which they have a potential or existing garnishment and should stay abreast of developments. Until guidelines for the accurate implementation of garnishments in Georgia are clarified and finalized, caution is the best policy.