June 16th, 2011
Winning a judgment against an individual or entity is one thing. Actually collecting on that judgment can be an entirely different story. Minnesota law affords a person seeking to collect a judgment various avenues to first discover the debtor’s assets and then to collect their judgment from those assets. One commonly used tool is garnishment.
A creditor may use a garnishment to temporarily freeze and then permanently seize money held by a judgment debtor in that judgment debtor’s bank account. With some limited exceptions or exemptions, Minnesota law currently permits a creditor to freeze and seize all funds in a joint account; it does not matter whether all or any of the money was actually deposited there by the judgment debtor.
While the other joint account holder or holders can try to show that some or all of the money in the seized account is theirs, last April 2010, the Minnesota Supreme Court ruled that the presumption was that all of the money was the debtors until the other account holders proved otherwise. Savig v. First Nat’l Bank of Omaha, No. A-9-1221 (Minn. April 22, 2010)
This got the attention of many consumer advocates. And, in a similar case currently before the United States District Court for the District of Minnesota, Kristie Billiar v. Atlantic Credit & Finance, Inc., legal counsel for a plaintiff who held funds in a joint account with a judgment debtor are asking that Minnesota’s garnishment law be ruled unconstitutional. What they argue is that the law as applied deprives the non-debtor joint account holder of their property without due process, that is, prior notice and an opportunity to be heard in court.
The due process clause of the U.S. Constitution’s 14th Amendment provides that no state shall “deprive any person of life, liberty, or property, without due process of law.” But counsel for Ms. Billiar argues that enacting and enforcing a garnishment law that allows a non-debtor’s money to be frozen and seized for another’s debt, all without prior notice or a hearing, violates this due process right.
It is predicted that a decision in favor of Ms. Billiar will effectively end the use of garnishment as a means for collecting judgments. Judge Patrick J.Schlitz heard motions regarding the constitutionality of the Minnesota garnishment law on March 4, 2011. The decision is under advisement.