If you are a business owner and have employees, at some point you will receive a garnishment.  Garnishment is a post-judgment process that allows a judgment creditor to acquire the judgment debtor’s assets (property or money).  If the judgment debtor is your employee, the judgment creditor will serve a garnishment on you. The garnishment directs you to send the employee’s property or compensation to the judgment creditor (within specific guidelines).

So, if you receive a garnishment, what should you do with it?  Answer it!

Tennessee law requires that you answer the garnishment within 10 business days. Your answer must state whether or not you have the employee’s property or owe any money to the employee. If you fail to file an answer within that timeframe, the judgment creditor may file a motion to have a conditional judgment entered against you. The conditional judgment may result in you being responsible for the ENTIRE DEBT owed by your employee. Tennessee law states,

[i]f . . . the garnishee fails to appear and answer the garnishment, the garnishee shall be presumed to be indebted to the defendant to the full amount of the plaintiff’s demand, and a conditional judgment shall be entered up against the garnishee accordingly.

Tenn. Code Ann. § 29-7-114.

Fortunately, this harsh result is not automatic. Otherwise, you could be liable for hundreds of thousands of dollars simply because you did not respond in the very short time allowed by the garnishment law. That is not a fair to an employer unfamiliar with garnishments.

Conditional judgments are just that – conditional. They are not the same as final judgments. The court explained in Smith v. Smith, 165 S.W.3d 285 (Tenn. Ct. App. 2004), that, unlike default judgments entered for failing to respond to a complaint, conditional judgments for failing to respond to a garnishment are not punitive. Rather, conditional judgments are meant to put the garnishee (you – the one receiving the garnishment) on notice that an answer must be filed. It is an enforcement tool to make the garnishee respond to garnishment.

The entry of a conditional judgment is a threat of final judgment if you fail to answer to the garnishment. After the conditional judgment is entered, you will be given an opportunity to appear before the court and explain why you should not be responsible for your employee’s debt. “[T]he conditional judgment gives ‘another opportunity’ to the garnishee to ‘answer the garnishment.’”

The court in Smith v. Smith also explained that if the garnishee answers the garnishment before the conditional judgment is entered, even though it is late, a conditional judgment cannot be entered. Because a conditional judgment is an enforcement tool giving the garnishee one last chance to respond, it is no longer necessary if the garnishee does, in fact, respond.

So, failing to timely respond to a garnishment is not the end of the world. The garnishment statutes show some grace and allow you to file a late answer to avoid entry of a final judgment.

But, do not think you have extra time to respond to a garnishment simply because the conditional judgment is not a final judgment. You should answer the garnishment within 10 business days as required by the garnishment statutes. Failure to do so increases the chance that something will go wrong, and the conditional judgment will become a final judgment making you responsible for your employee’s debt. Also, responding to a conditional judgment and appearing in court to avoid entry of a final judgment will likely require you to obtain an attorney, which only adds to your costs.

The grace offered by the garnishment law is not cheap, and you should use it sparingly. As in most other situations, dealing with a problem now is much cheaper and more efficient than dealing with it later after it has grown. The best practice is to respond to a garnishment within the time required by the garnishment statutes.