The recent opinion of Judge Marvin Shoob in the Strickland v. Alexander case has created a great deal of confusion among banks about their duties in responding to a summons of garnishment in Georgia.  In that opinion, Judge Shoob declared the Georgia garnishment statute to be unconstitutional on multiple grounds. Primary among the  grounds cited by Judge Shoob was the absence of any notice to the debtor of the existence of statutory exemptions which shield certain funds from garnishment or the procedures available to assert those exemptions.  It is unclear whether the decision will be appealed, modified, or cured by subsequent legislation.  Numerous esoteric questions have been raised by the legal community about the validity of the opinion, but those questions are beyond the scope of this post.

Whether Judge Shoob’s opinion is appealed, modified or cured by the Georgia General Assembly, banks currently face significant questions in its wake.  The most important of these questions is “should a bank continue to answer summons of garnishment or not.”  Many Georgia banks understandably have questions about their potential liability to both creditors and debtors by continuing to participate in the garnishment process.  While banks could choose to litigate the validity of every single summons that they have received or subsequently receive, that is hardly a practical or economical strategy for most of our banking clients.

An initial option available to any bank during this time is to contact the creditor which served the summons and ask that the summons be withdrawn. This may be effective since questions of liability are also being faced by the very creditors who are seeking to use the garnishment process.

If the creditor will not withdraw the summons, and pending a resolution of the constitutional issues by the courts or the General Assembly, the next best option is (1) to continue answering summons of garnishment after performing an appropriate review for the existence of funds covered by statutory exemptions and (2) to pay the non-exempt funds into the registry of the court.  Doing so will eliminate any risk the bank may run to the creditor which served the summons of garnishment through default or otherwise.  Moreover, since a summons is essentially a court order, the bank will have a strong argument that its actions are both justified and in good faith.  We note that even Judge Shoob found that the bank involved in the Strickland v. Alexander case could not be found liable for responding to the summons.  See Strickland Order at p. 9.

The garnishment statutes continue to provide a procedure for debtors to challenge any payments that they believe may be exempt from garnishment or otherwise improper.  If banks wish to obtain further insulation from liability, they may provide a notice to their account holders about the existence of the statutory exemptions and the procedures available to raise those exemptions during the garnishment process.  The bank in the Strickland case provided such a notice, though it was an abbreviated one.

Finally, it is worth noting that the garnishment statutes also provide a safe harbor to a bank in answering and making such a payment if the bank believes that doing so is “reasonably required by a good faith effort to comply with the summons.”  O.C.G.A. § 18-4-92.1(b).

While there is no perfect answer to all the questions of banks who have received a summons of garnishment during this confusing time, the benefits of this proposed course of action seem to far outweigh any potential risks in the vast majority of cases.  As with anything else in the law, there may well be unique cases where because of the contentious nature of the litigants, the significance of the issues raised, or material threats against the bank, alternatives should be considered.  In such cases, we are happy to consult with our banking clients on an appropriate course of action.