You may consider yourself a business lawyer, employment law practitioner, corporate lawyer, commercial law specialist, or debtor/creditor/collections expert. If your clients process writs of garnishment, read up!
Garnishments represent an area of potential liability for several reasons: employee or account holder misidentification, honoring a writ that has expired, or failure to include identifying information with the payment. The Professional Liability Fund has witnessed all three errors.
Believe it or not businesses who are garnishees frequently issue payments with blank check stubs and no attached documentation. While privacy or identity theft concerns may impose limitations on the amount of identifying information provided, it is crucial that the garnishor be able to identify the debtor and match payments received to the proper account. Otherwise your client’s check is useless. Furthermore, the identifying information cannot be cryptic. For example, a partial home address for the debtor with no other information (debtor’s name, account number, TIN, circuit court case number).
This is not just an issue for the garnishors who are trying to process payments. Your garnishee clients need to maintain a proper audit trail. Check stubs and related accounting entries should carefully detail the identity of the debtor and any other information needed to substantiate funds withheld.
For those who are skeptical, this problem is rampant. And it isn’t an issue limited to small Mom and Pop businesses who don’t know how to properly respond to garnishments. Large banks and employers regularly send off checks to garnishors with little or no identifying information that can be linked to a debtor. Please advise your clients to keep proper records and include sufficient information to identify the account holder or employee whose funds are being garnished.
A side note for those of you who are garnishors or who represent garnishors: Many lawyers who handle collections send calculation sheets to their garnishees. Your calculation sheets should contain appropriate identifying information. Instruct garnishees to return the calculation sheets with their payment and track garnishee names in your collection system to aid in processing and matching payments.
All Rights Reserved Beverly Michaelis (2013)