Monday, February 20, 2012

Changes to the Garnishment Laws: Corporations Need Not Answer Through A Lawyer

On Feb. 7, Gov. Nathan Deal signed HB 683 in to law, effectively eliminating the requirement that corporations have a lawyer represent them to answer a garnishment.

This new law is lauded as removing an unnecessary regulation on business. While this change to the law does help cut some amount of bureaucracy and expense for business, but it is not without some pitfalls. A garnishment is a legal proceeding and if it not handled properly can come with some very expensive consequences for business.

Garnishments are a routine part of operating a business. It is a legal process that allows a creditor who has received a judgment in a court to have the money taken from that person’s wages or bank accounts. Employers and banks respond to garnishment proceeding for creditors collecting from their employees and customers as a part on a regular basis. Most of the information required for a response to a garnishment is administrative in nature, such as payroll information and account balances. These tasks can and in the past have been handled by bookkeeper or payroll clerk. In fact, this is how most businesses have handled garnishments in Georgia up until 2011.

On Sept. 12, 2011, the Supreme Court of Georgia approved a formal advisory opinion of the State Bar of Georgia's Unauthorized Practice of Law Committee that interpreted the current law, as it is written, to prohibit non-lawyers from answering garnishments on behalf of corporations. This ruling had a profound effect on employers and banks that are most likely to answer garnishments. Justice David Nahmias, following the recommendations of the State Bar of Georgia on the issue, recommended that those interested should seek to modify either current Georgia State Law or the Court Rules.

HB 683 did just that, giving clerical workers and agents the authority to file a garnishment on behalf of the corporate entity. While this comes as a great relief and savings to business, garnishments should not be seen as just routine paperwork. A garnishment is a legal proceeding pending in a court, and as such, as procedures that must be followed. Failure to follow those procedures and meet the specific deadlines can result in the creditor taking a judgment against the employer or the bank for the amount owed to the creditor. This could have the effect of the employer or the bank taking the place of the original debtor. While there are some provisions in the law that give the corporation some relief, those measures are time sensitive and procedurally driven and may cost the creditor out of pocket as well.

The law allows for an employer or bank to deduct up to $50 for legal fees to answer a garnishment. While this probably will not cover the cost of hiring an attorney to answer the garnishment, it may cover the cost of getting some sound legal advice to make sure the garnishment is answered correctly.


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