A Very Brief Overview of California Collection Law

[Jay]

A Very Brief Overview of California Collection Law

The procedure for collecting judgments in California is mostly governed by the Enforcement of Judgments Law, usually referred to the "EJL". The EJL provides a framework for the basic remedies, including levies, garnishments, assignment orders, charging orders, and the appointment of receivers, etc.

In addition to the EJL, a variety of California statutes provide additional avenues for creditors to seek relief, such as the California Uniform Fraudulent Transfers Act ("CUFTA").

California debtors have little protection from creditors. While federal law caps the garnishment of wages at 25% of take-home, the California exemptions are sparse.

In a state where few homes are valued under $250,000 the EJL exempts only a minimal $50,000 for an unmarried person, $75,000 for a couple, and $150,000 for those who are disabled or over the age of 65.

Otherwise, California exemptions are minimal. Life Insurance policies have minimal protection, and most annuities have none at all. IRAs and qualified accounts are subject to the "means test" of CCP 714.115(e) that will leave most debtors uncomfortable in retirement. And pretty much nothing else has anything like significant protection.

Unlike most other states, the California courts in the larger counties are organized so that special judges, known as "Commissioners" sit in special departments that do little more than hear collection matters. But the EJL is set up to require a minimal amount of court involvement in the first place, allowing court clerks -- and sometimes even court reporters -- to sign orders than in many states might require a full hearing before a district judge.

It is the practice of debt collection that is difficult in California, mainly because so much of the burden is shifted to the "levying officer" (a/k/a overworked local sheriff's department) to go out and grab assets. It is easy to get a Writ, but much more difficult to get a deputy serve it, confiscate the assets, warehouse the assets until sale, and then finally sell the assets off at auction.

There are also legacy provisions within the EJL that can make it sometimes difficult to levy on a bank account, for instance, in a county were the original judgment was not entered. Thus, if debtor's cannot find solace in the meager exemptions from collections, sometimes they can hide behind the procedure to thwart collection and force a settlement for less than the full amount of the judgment.

Speaking of which, the post-judgment interest on judgments in California is a liberal 10%. Chuckling that they "can't get that sort of interest at a bank", many debt collectors will buy a judgment from a creditor, let the judgment sit in their files for some years until it doubles, and then out-of-the-blue surprise the debtor with a wave of bank account levies and liens. The debtor who lets a California debt linger is a foolish debtor.

Because California's population is so large, and seemingly more litigious than elsewhere, there are probably more court opinions that interpret collection matters than any other state. Thus, in addition to the ELJ and supporting statutes, there is a large body of case law to which litigants can turn to resolve certain issues.