Your Company Got a Notice of Garnishment Against a Supplier or Employee: What to Do

Understand your role first

The garnishment targets someone else's debt; your company is simply ordered to hold money it would otherwise pay to that person.

Two situations are common. A supplier of yours loses a lawsuit, and the winning creditor uses the court's execution process to reach the money your company owes that supplier. Or an employee is personally sued and loses, and the creditor goes after amounts due to that employee from your payroll. Garnishment can also happen before judgment, as a provisional remedy, in which case the document title and next steps differ.

Read the notice for three things. First, who the debtor is: check that the name, registered business name and TIN actually match your counterparty, because mismatches happen. Second, the scope: all payables, a specific invoice, or a stated cap. Third, what the court wants from you and by when, usually a written report. If the legal English is unclear, photograph and file the document before doing anything, and do not act on guesses.

Keep the right mindset. The court is not asking your company to decide who is right. It wants you to keep the money where it is and tell the truth about what you hold. Your best position is neutral, compliant and well documented. You do not argue the creditor's case, and you do not defend the debtor either. Anything beyond holding and reporting goes through counsel.

It also helps to know who else is involved. The creditor who won the case is usually represented by a lawyer, the sheriff carries out the court's orders, and the debtor is your supplier or employee. Your company does not owe the creditor anything directly; its only duty runs to the court. Keeping that in mind stops staff from negotiating with the wrong person or promising things the company cannot deliver.

Day one: five things to do

Stop payments, keep evidence and name a single point of contact on the same day; money that leaves after service can become your problem.

One, verify. Notices are typically served by a court sheriff. Note the court and case number and confirm through the court's public channels or a lawyer that the case exists. People impersonating sheriffs do appear. A real garnishment asks you to hold funds and report, not to hand cash to whoever is at the door or wire money to a personal account.

Two, freeze the payable. Tell finance in writing that all amounts due to this supplier or employee are on hold from the time of service, and pull anything already queued in a payment run.

Three, list what you owe: invoices, amounts and due dates, or for an employee, unpaid salary, bonuses or final pay. This becomes the basis of your report.

Four, appoint one person to handle all contact with the court, counsel and the debtor, so departments do not give conflicting answers.

Five, file the original notice with the time of receipt and the server's details. If it reached you late through an old address, record the actual date and see court mail sent to an old address.

A short internal memo on day one is worth the effort. Address it to finance, the cashier, the business owner of the supplier relationship and HR if an employee is involved, state that a court notice was received, name the person in charge, and say clearly that no payment to the named party may be released without that person's written approval. Ask each recipient to reply confirming they have read it, so there is a record if a payment slips through later.

Reporting to the court

Most notices require the garnishee to state in writing, within the period set in the notice, whether it holds the debtor's money and how much; answering on time and accurately is your core obligation.

A typical report states whether you hold funds or property of the debtor, what kind, how much and when due. If you hold nothing, explain why: the invoice was paid before service, the contract ended, or the debtor actually owes you. Attach supporting records such as invoices, payment proofs, the relevant contract clause or the relevant payroll extract.

Three points on drafting. State facts only and do not comment on the case. Make the figures match your books; a conditional statement such as an amount payable subject to acceptance of a delivery is better than a rough estimate. Have counsel review it before filing, and keep proof of filing.

If you believe the garnishment is wrong, for example the named debtor is not the same legal entity as your counterparty, raise it in the report or through counsel. Do not simply ignore the notice. Deadlines and procedure follow the court document and your lawyer's advice, and the consequences of missing them can fall on the company.

Keep a copy of everything you submit in the same file as the notice, so that whoever handles the next instruction from the court can see the full history at a glance.

When the amount you owe is still moving, for example a delivery is under inspection or a retention is not yet due, say so plainly and explain what event will make it payable. Courts deal with conditional amounts routinely; what causes trouble is a figure that later turns out to be wrong. If the debtor owes your company money as well, mention it and let counsel advise whether it affects what you hold.

If the target is an employee's pay

Wages carry special legal protection, so confirm with a lawyer how much can lawfully be held before you withhold anything.

Philippine law shields workers' wages from execution to a degree, with limited exceptions for certain kinds of debt. Exactly what can be withheld, and how much, depends on the notice and the structure of the employee's pay, and that is a call for counsel. Do not read the notice broadly or freeze everything just to be safe, because over-withholding creates its own labor problem.

Practically, isolate the amounts that may be affected and hold only the disputed portion until counsel confirms the scope; decide on the regular pay schedule on the same advice. Once confirmed, act on the court's instruction and show the deduction and its basis clearly on the payslip.

Tell the employee promptly, privately and in writing what the company received and what it must do. Do not comment on the personal debt or discuss it with coworkers. If the employee disagrees, point them to their own lawyer and the court. Keep normal payroll discipline throughout; see the risks of late salary so this does not turn into a second dispute. A short, factual note to the employee usually prevents rumors, and it also gives you a record that the company acted transparently from the start.

Also think about timing. If the notice arrives just before a payroll date, it is better to delay only the affected portion by a few days while counsel confirms the scope than to release everything or freeze everything on impulse. Tell the employee which part is on hold and why, and give a realistic date for the decision, so the person can plan and does not hear about it first from the payslip.

Common mistakes: paying out, over-holding, impostors

The biggest risk is not the notice itself but paying the debtor after service, which can leave the company liable to pay again.

Mistake one: paying out. Finance missed the memo, an automated batch ran, or sales promised the supplier a payment this week. A payment made to the debtor after service may not be recognized as valid, and the company could be ordered to deliver the amount again. Make the stop instruction cover every channel, including bulk online banking and cheques.

Mistake two: over-holding. Freezing everything owed to the counterparty, including amounts outside the notice, can expose the company to a breach claim. Hold what the notice and counsel say, and handle the rest under the contract.

Mistake three: impostors. A genuine notice tells you to hold and report. Anyone demanding cash or a transfer to a personal account should be verified before you do anything, and reported if suspicious. The verification habits in what to do when your company is sued apply here too.

Mistake four: side deals with the debtor. Debtors often ask for a partial payment or say a settlement is near. That is between them, the creditor and the court. Your company acts only on a written release or delivery order from the court, and nothing else.

A fifth, quieter mistake is losing the paper trail. Keep the notice, your internal stop memo, the payables list, the report you filed and every later court instruction together in one file. If the case is questioned months later, that file is what shows the company held and reported exactly as required, and it is usually the fastest way to close any argument about whether a payment was proper.

Closing it out, and how YIXING can help

Garnishments end with a further written instruction from the court, either a release or an order to deliver the held amount; follow it and keep proof.

Three outcomes are typical. The case settles or the debtor pays, the court lifts the garnishment, and you resume normal payments and file the release. The court orders you to deliver the held funds to the sheriff or a designated account; you comply, get an official receipt, reduce the payable in your books and inform the debtor in writing. Or the process drags on, in which case your lawyer can check its status with the court; the company should not release the money on its own initiative.

Afterwards, make the process routine. Front desk and admin should send any court document straight to the designated person, finance should check a payment-hold list before each run, and contracts can state that withholding under legal process is not a breach. The same execution logic helps when your company is the creditor: see enforcing an arbitral award and enforcing a labor award.

YIXING can help organize the payables and records, translate Chinese-language material, map the compliance and accounting effects for your Philippine company, and connect you with a licensed lawyer. We are a private consultancy, we do not appear in court, and we do not promise outcomes. Reach us through YIXING compliance retainer. YIXING is a private consultancy registered with the Philippine SEC (Registration No. CS202009551), holding Bureau of Immigration accreditation (BI Accreditation No. CA-202624381-1, valid until 2027-06-30) as well as DOLE and PRA accreditation. We are not affiliated with any government agency. Every case is different: consult a licensed lawyer; this article is not legal advice.