In Michigan, a creditor who wants to collect a debt from you has to sue you in court and win a judgment first; only then can they garnish your wages, freeze your bank account, or put a lien on your property, and even then both Michigan exemptions and federal caps limit what they can take. What Michigan creditors can do to collect a debt is tightly scripted by statute, and most of your protection depends on responding to deadlines you may not know are running.
They Have to Sue You and Win First
No garnishment, no bank levy, no lien without a court judgment. The creditor files a complaint, has you served with a summons, and then waits for your answer.
You have 21 days from service to file a written answer with the court. This is the single most important deadline in the whole process. Miss it and the creditor asks for a default judgment, which the court enters without a hearing. From that moment the creditor has full authority to pursue collection, exactly as if a judge had heard your side and ruled against you. File an answer on time and the case goes to a hearing where a judge decides whether you actually owe the money and how much.
You do not need a lawyer to file an answer. In District Court the answer can be short and even handwritten. What it cannot be is late.
How Long a Creditor Has to Sue You
Michigan gives creditors six years to sue on most contract debts, including credit cards, personal loans, and medical bills. Debts tied to a real estate deed or mortgage carry a ten-year window.1Michigan Legislature. Michigan Code 600.5807 – Period of Limitations The clock generally runs from the date of your last missed payment.
If the deadline passes, the debt is time-barred and a court should not enter a judgment against you. The catch: this is an affirmative defense. If a creditor sues on a time-barred debt and you ignore the suit or forget to raise the statute of limitations in your answer, the court will not throw the case out on its own.2Consumer Financial Protection Bureau. Can Debt Collectors Collect a Debt That’s Several Years Old
Be careful with old debts. In many situations, making even a small payment or acknowledging the debt in writing can restart the six-year clock and give the creditor a fresh window to sue.2Consumer Financial Protection Bureau. Can Debt Collectors Collect a Debt That’s Several Years Old Verify the timeline before you pay anything or promise anything in writing.
What a Creditor Can Take After a Judgment
Once a Michigan creditor has a judgment, state law gives them three main collection tools. Each works differently.
Wage Garnishment
This is the most common method. The creditor obtains a writ of garnishment and your employer is ordered to withhold part of your paycheck and send it directly to the creditor. A garnishment of periodic payments stays in effect until the judgment is fully satisfied, including interest and costs.3Michigan Legislature. Michigan Code 600.4012 – Garnishment of Periodic Payments
Federal law caps the take. A creditor can get the lesser of 25% of your disposable earnings for the pay period, or the amount by which your disposable earnings exceed 30 times the federal minimum hourly wage, which works out to a protected floor of $217.50 per week.4Office of the Law Revision Counsel. 15 U.S. Code 1673 – Restriction on Garnishment Disposable earnings means take-home pay after legally required deductions like taxes and Social Security, not gross pay. If you earn near minimum wage, the garnishment may be well under 25%, or nothing at all.
Bank Account Levies
A creditor can also garnish your bank account. Unlike wage garnishment, which drips money out of each paycheck, a bank levy is a one-time grab at whatever is sitting in the account when the writ is served. The bank freezes the funds immediately, and you have 14 days from the date you are served to file objections claiming some or all of the money is exempt.5Michigan Legislature. Michigan Code 600.4011 – Garnishment
A joint account does not shield the funds. The whole balance can be frozen even if your co-owner does not owe the debt. The non-debtor has to prove their share by showing deposit records, pay stubs, or benefit statements tracing specific deposits to their own income. Without that paper trail, the law presumes equal rights to the money and the creditor can reach all of it.
Property Liens
A Michigan judgment automatically creates a lien against the debtor’s real estate, including land, homes, and interests in contracts for the sale of land. The lien does not force an immediate sale. It means the creditor gets paid when you eventually sell or refinance. If the debt is large enough, the creditor can ask the court to order a forced sale, though the homestead exemption limits what they can actually recover from your primary residence.
Income a Creditor Generally Cannot Touch
If your income comes from Social Security, Supplemental Security Income, veterans’ benefits, federal retirement, or similar federal programs, those funds are protected from commercial debt collectors. How the money enters your account matters. With direct deposit, your bank is required to review your account history and automatically shield two months’ worth of benefit payments from any garnishment order.6Consumer Financial Protection Bureau. Can a Debt Collector Take My Federal Benefits
Deposit the same checks by hand and the bank has no obligation to protect anything automatically. Your whole balance could be frozen, and you would have to go to court to prove the money came from an exempt source. If you rely on federal benefits, switching to direct deposit is one of the simplest protective steps available.
Child support and alimony garnishments are a separate category and are not limited by the ordinary creditor rules above.
Property Michigan Law Shields From Creditors
Michigan protects certain property from seizure even after a judgment. The protections are not generous by national standards, but they cover the basics. The main categories sit in MCL 600.6023.
Your primary residence is protected up to $3,500 in equity. Inside a city or village plat, that covers one lot and the dwelling on it; outside a recorded plat, up to 40 acres and the home.7Michigan Legislature. Michigan Code 600.6023 – Exemptions From Levy and Sale The $3,500 cap has not been adjusted in decades and will not shelter much equity in a typical Michigan home.
On personal property, Michigan fully exempts all wearing apparel, family pictures, and six months’ worth of food and fuel, with no dollar cap. Household goods and appliances (furniture, kitchen items, books, appliances) are exempt up to $1,000 in total value. Tools, equipment, materials, and one motor vehicle used for your trade or profession are exempt up to $1,000 combined.7Michigan Legislature. Michigan Code 600.6023 – Exemptions From Levy and Sale Life and health insurance benefits and funds in individual retirement accounts are also exempt.
In bankruptcy, Michigan lets debtors choose between the state exemptions above and the federal bankruptcy exemptions under 11 U.S.C. ยง 522.8Michigan Legislature. Michigan Code 600.5451 – Exemptions in Bankruptcy The federal set includes a $2,400 motor vehicle exemption and a $1,500 tools-of-the-trade exemption, among others.9Office of the Law Revision Counsel. 11 U.S.C. 522 – Exemptions Which set helps more depends on what you own.
The Judgment Grows While It Sits
Michigan judgments earn interest on the unpaid balance, compounded annually. The rate is reset every six months at 1% plus the average yield on five-year U.S. Treasury notes, and it runs on the whole judgment, including attorney fees and costs. In tort cases where a reasonable written settlement offer was rejected, the rate is 2% higher.10Michigan Legislature. Michigan Code 600.6013 – Interest on Money Judgment
Ignoring the judgment does not make it cheaper. A creditor with a lien on your real estate can afford to wait, and the balance keeps climbing.
What Collectors Are Not Allowed to Do
Federal law (the Fair Debt Collection Practices Act) governs third-party collectors. Michigan’s Collection Practices Act covers a broader group, including some original creditors, under MCL 445.252.11Michigan Legislature. Michigan Code 445.252 – Prohibited Acts
Under Michigan law, a collector cannot falsely tell you that nonpayment will result in arrest or misrepresent the legal status of a threatened lawsuit. They cannot send forms that look like court papers or carry government seals when they are not. They cannot contact your employer about the debt unless you authorized it in writing after the debt went to collection, or the employer initiated the contact. They cannot threaten or use violence. They cannot publish your name on a debtor list or otherwise publicly shame you, outside of normal credit reporting.
Federal rules add that collectors cannot call before 8:00 a.m. or after 9:00 p.m. local time. You can demand written verification of the debt, including the amount and the original creditor’s name. Send a written dispute within 30 days of the collector’s first contact and collection activity has to pause until the collector provides that verification.
The 8 a.m. to 9 p.m. window also applies to email and text messages, measured by when the collector sends the message. A collector can only email an address you previously used for the debt, one you consented to directly, or one disclosed through a specific notice process with at least a 35-day opt-out period.12Consumer Financial Protection Bureau. Regulation F – Communications in Connection With Debt Collection You can shut down electronic contact by sending an opt-out through the same channel.
If You Settle, Watch for a Tax Bill
If a creditor forgives $600 or more of your balance in a settlement, they report the cancelled amount to the IRS on Form 1099-C.13Internal Revenue Service. About Form 1099-C, Cancellation of Debt The IRS treats forgiven debt as taxable income, which can land as a surprise the following April.
There is a meaningful exception. If your total liabilities exceeded the fair market value of your assets when the debt was forgiven, you may qualify for the insolvency exclusion. File IRS Form 982 and exclude the cancelled debt from income, up to the amount by which you were insolvent. If your debts were $10,000 and your assets $7,000, you were insolvent by $3,000 and could exclude that much.14Internal Revenue Service. Instructions for Form 982 People who settle for less than they owe are often insolvent at the time, so the exclusion comes up more than borrowers expect.
Bankruptcy Stops Collection Immediately
Filing a bankruptcy petition triggers an automatic stay that halts most collection against you the moment the case is filed: garnishments, bank levies, lawsuits, and collector phone calls.15Office of the Law Revision Counsel. 11 U.S. Code 362 – Automatic Stay A creditor who knowingly keeps collecting after that violates a federal court order.
The stay does not reach everything. Child support and alimony garnishments continue. Certain tax debts, student loans, debts incurred through fraud, drunk-driving injury debts, criminal restitution, and court-ordered fines are generally not dischargeable, so the creditor can resume collection once the case ends.16Office of the Law Revision Counsel. 11 U.S. Code 523 – Exceptions to Discharge Because Michigan’s homestead and personal property exemptions are low, running the numbers under both state and federal exemption sets before filing is worth the effort.