Summary: Collecting a monetary award following a civil lawsuit in Michigan is rarely easy. It takes time and effort. Judgment creditors should be prepared to invest plenty of time. They should be prepared to play the long game.
Winning a civil lawsuit is a big deal, especially if it includes a monetary award. But the entry of a judgment is more than just a formal legal action. It is the start of a whole new chapter in the litigation story. The next chapter, collection, can be fairly lengthy thanks to a combination of timelines, procedures, and a lack of cooperation from the debtor.
Our experience in collecting money judgments in Michigan has been such that we believe in playing the long game. Sitting on your rights as a creditor, especially when the monetary award is sizable, is the easiest way to lose those rights. Time is not on your side as a creditor. So you need to get busy right away and continue working toward full collection until you get what you are owed.
Timelines and Interest
Judgment collection in Michigan is subject to certain timelines. These timelines dictate when you can do certain things. They also dictate judgment expiration. The need to pay attention to the timelines is one reason we recommend bringing in a professional, like Judgment Collectors, from day one.
Creditors choosing to collect on their own are responsible for knowing, understanding, and applying the timelines. In addition, there is something else to pay attention to: interest payments. In Michigan, money judgments are not static. They are subject to interest for as long as they go unpaid.
Michigan’s Cooling-Off Period
As a creditor, your first interaction with the timeline concept begins immediately after the judgment is officially recorded by the court. Recording begins a 21-day cooling-off period during which you cannot begin enforcement efforts. You cannot pursue garnishment, seize debtor property, etc. If you would like more information, look into Michigan Court Rule (MCR) 2.614.
The 21-day cooling-off period exists for the debtor’s benefit. It gives the debtor a couple of weeks to either file an appeal or request a new trial. For the record, it is exceedingly difficult in Michigan to overturn a money judgment. A debtor needs to demonstrate that the court erred in its decision, which is not easy.
Time to Get Busy
Even though creditors cannot begin enforcement proceedings within the first 21 days, there is still plenty to do. That three-week period offers a golden opportunity to prepare for eventual collection. Here are three things every Michigan creditor should be doing:
- Verifying Assets – Review all current records relating to the debtor’s assets. These include bank account records, employment information, and so forth. They should all be current.
- Drafting Paperwork – If there are plans to immediately implement tools, like garnishment, paperwork can be drafted ahead of time. That way, court filings can be handled on the first day after the cooling-off period expires.
- Searching for Property – The cooling-off period is a great time to begin searching for property and other assets the debtor might own. Just about anything that is not exempt under Michigan law is worth looking into.
The most important thing to note is this: even though the rules in Michigan prevent taking enforcement actions during the cooling-off period, they do not prevent creditors from doing everything they can to prep for eventual collection. Make no mistake, there is plenty to do during those few weeks.
Michigan’s Statute of Limitations
At the other end of the collection equation is another critical timeline element: expiration. Money judgments in Michigan are subject to a 10-year statute of limitations. As a creditor, you have ten years from the date a judgment is entered by the court clerk to collect what you are owed. That seems like a long time, but it is really not – especially if a debtor does not offer their full cooperation.
The most dangerous trap for Michigan judgment creditors is sitting on their rights with the assumption that they have plenty of time to take up collection efforts later on. Once the clock starts ticking, it keeps right on doing so until time has expired. A judgment creditor not actively pursuing enforcement could easily find himself up against the statute of limitations and wondering where all the time went.
Judgments Can Be Renewed
What if a judgment creditor does everything within his power and still fails to collect before expiration? Michigan law allows judgments to be renewed for another 10 years. There is only one caveat: you need to file for renewal before the original judgment expires.
Filing within a month of expiration should do the trick. Note that the court does not have to take up your petition before the expiration date. As long as you file in time, the court can take up your petition later on and still renew your judgment.
Assessing Interest on the Debt
Collection efforts dragging on for 10 years can be taxing on a judgment creditor. So much so that some creditors just give up. But there is a silver lining here: the ability to assess interest.
In Michigan, the law recognizes the fact that money loses value over time thanks to inflation. Therefore, the law also recognizes the need for judgment creditors to add interest to unpaid balances. The only confusing aspect about assessing interest is understanding how it is calculated.
If the original dispute between parties was governed by a contract in which interest payments were stipulated, then the judgment creditor must abide by that contract. Otherwise, Michigan uses a floating rate.
The floating rate is calculated twice annually: on January 1st and July 1st. It is based on the average 5-year U.S. Treasury capital note auctions for the previous six months. One percent is added to that average to determine the floating rate.
The ability to assess interest is a clear indicator that collecting money judgments in Michigan can take time. Therefore, judgment creditors must be prepared to play the long game. We are here to help. Judgment Collectors specializes in money judgments. We have a proven track record and a team of experts ready to start working on your judgment today.
FAQs
Do I have to wait the full 21 days even to send a collection letter?
Yes. The 21-day cooling-off period applies to all collection efforts.
What can I do during the cooling-off period?
Even though you cannot officially begin enforcement efforts during this time, you can still prepare for collection by searching for assets, verifying current information, and even plotting out a collection strategy.
Is Michigan’s 10-year statute of limitations a hard limit?
Yes, in the sense that there is no way to extend it without renewing. Note that the statute of limitations on small claims cases is just 6 years instead of 10.
Should I enlist the help of a collection professional?
Given that judgment collection in Michigan is a long-game enterprise, it is advisable to bring in professional help on day one.
How do collection agencies get paid?
Some collection agencies purchase judgments for pennies on the dollar. Others, like Judgment Collectors, work on consignment. We get paid based on what we collect.