Michigan Senate Passes Bill to Expand Garnishment and Debt Collection Exemptions

Legislative Snapshot

• Bill: Michigan Senate Bill 1137, companion to House Bill 6230
• Jurisdiction: Michigan
• Status: Passed Michigan Senate Sept. 10, 2026
• Key Provisions: New wage garnishment limits; exemptions for certain benefits and bank deposits; increased vehicle, homestead, household, and occupational property exemptions; new exemption notices and judgment enforcement procedures
• Effective Date: 180 days after enactment, if enacted
• Industry Impact: Would significantly change the assets and earnings available for consumer judgment enforcement and create additional compliance obligations during garnishment and execution proceedings

The Michigan Senate has passed legislation that would significantly revise the state’s garnishment and judgment enforcement laws, including new protections for wages, bank accounts, homes, vehicles and property used for work.

Senate Bill 1137, sponsored by Sen. Jeff Irwin, is the Senate companion to House Bill 6230, sponsored by Rep. Kara Hope. The Michigan Legislature describes both measures as revisions to procedures for the collection of judgments.

The Senate passed SB 1137 on Sept. 10. The legislation would amend Michigan’s Revised Judicature Act and, if ultimately enacted, would take effect 180 days after enactment.

The proposal revives legislation considered during the previous legislative session. A substantially similar measure, HB 4900, passed the Senate in December 2024 but did not become law.

Bill Would Reduce Amount of Wages Subject to Garnishment

Among the most consequential provisions for creditors and collection organizations is a proposed change to Michigan’s wage garnishment limits.

Under SB 1137, a debtor’s garnishable earnings generally would be protected except for the lesser of 15% of weekly garnishable earnings or the amount exceeding 35 times the applicable federal or Michigan minimum hourly wage, whichever minimum wage is greater. The bill defines garnishable earnings after legally required deductions and allows an additional deduction of up to 15% for health insurance or medical expense account contributions.

The proposal also specifies that the wage protections would apply to debtors physically employed in Michigan, regardless of whether their employer maintains offices outside the state.

Bank Accounts and Certain Benefits Would Receive New Protections

SB 1137 would expressly exempt several categories of payments from garnishment, including means-tested public assistance, unemployment compensation, certain federal and state earned income tax credits, disability benefits and workers’ compensation benefits.

Financial institutions served with garnishments would have to review deposits made during the preceding 90 days and identify money that can be traced to protected sources. Those amounts could not be turned over under the garnishment.

The legislation also would establish a baseline exemption for money held in deposit accounts. A debtor could protect the greater of $800 or the amount identified as exempt under the bill’s tracing provisions.

For consumer debt judgments, the bill also would generally prevent the state treasurer from intercepting certain Michigan tax credit payments under garnishment writs served after Jan. 1, 2027, to the extent practicable.

Property Exemptions Would Increase Substantially

The legislation would make several changes to the amount and types of property protected from execution.

Household goods, furniture, utensils, books and appliances would receive an aggregate exemption of up to $5,000. One motor vehicle generally would be protected up to $5,000 in value, although a separate $3,000 exemption could apply to certain debts owed directly to financial institutions when specified conditions are met.

Tools, equipment, vehicles and other property used to carry on a debtor’s profession, trade, occupation or business would be protected up to $10,000, compared with the $1,000 amount in existing statutory language. Computers, mobile devices and related accessories would receive a separate exemption of up to $5,000.

The homestead exemption would increase substantially. SB 1137 would protect up to $125,000 in homestead value, or $200,000 when the debtor or a dependent is at least 65 years old or disabled.

Those dollar thresholds would not remain static. Most exemption amounts would be adjusted every three years based on inflation, while homestead exemptions would be adjusted using a Federal Housing Finance Agency home price index.

New Procedures Would Affect Judgment Enforcement

SB 1137 also proposes procedural changes that could affect creditors, collection agencies, collection law firms, employers, financial institutions, and court officers.

After entry of a judgment involving consumer debt, the court clerk would be required to notify the debtor that the judgment must be paid, but that exempt income, assets, and property cannot be required to satisfy it. The notice would also provide information about requesting installment payments.

When a creditor obtains a writ of execution or order to seize property, debtors would receive information explaining their right to claim exemptions and challenge the seizure of protected or necessary property.

Property that appears fully exempt would generally be presumed protected unless the creditor requests a hearing within 21 business days and establishes that the property is not fully exempt or contains significant value exceeding the applicable exemption.

The bill would also prohibit an employer or other garnishee from using garnishment actions as a reason to discipline, discharge, refuse to hire or refuse to contract with a debtor. Violations could result in reinstatement, compensation for losses and payment of reasonable attorney fees and costs.

ARM Industry Could Face Significant Operational Changes

For receivables management organizations operating in Michigan, SB 1137 could require changes to judgment enforcement strategies, garnishment calculations, exemption reviews, and procedures for identifying assets available to satisfy judgments.

The legislation does not eliminate garnishment or execution as collection remedies. Instead, it would narrow the income and property available for those remedies and establish additional procedures intended to prevent exempt assets from being seized.

The proposal’s definition of “consumer debt” covers obligations or alleged obligations arising from transactions primarily for personal, family, or household purposes, whether or not the obligation has been reduced to judgment.

Because SB 1137 has passed the Senate but has not been enacted, creditors and ARM companies should treat the provisions as proposed requirements rather than current Michigan law.