On October 7, California Governor Gavin Newsome signed SB 616 into law. SB 616, which goes into effect on September 1, 2020, includes changes to California law regarding garnishments in the following areas: (a) the requirements for a writ of execution found in the California Code of Civil Procedure (CCCP) § 699.520; (b) the content of a notice of levy under CCCP § 699.540; (c) the procedures for claiming exemptions after levy per CCCP §§ 703.510-703.610; and (d) property exemptions under CCCP §§ 704.010-704.210. These changes ultimately limit how much debt collectors can garnish from an individual’s bank account when recouping unpaid debts.
Specifically, California currently provides a judgment debtor with 10 days after the notice of levy is served to claim their exemptions, and a creditor 10 days to oppose the claims. Additionally, the state already specifies the maximum amount of a judgment debtor’s disposable earnings that are subject to a garnishment, exempting 75% of paid earnings of an employee if, prior to payment to the employee, the earnings were not subject to a withholding order or assignment order for support. In other words, a creditor can garnish up to an amount that is the lesser of either 25% of a debtor’s weekly earnings or 50% of the amount by which the debtor’s earnings exceed 40 times the minimum hourly wage, and there is no minimum balance that a debtor’s account must remain at post-garnishment.
Under SB 616, debtors no longer merely have 10 days to file a claim of exemption. Beginning September 1, 2020, debtors will have 15 days to file a notice of claim of exemption if the debtor was personally served with the notice of levy and 20 days if the debtor was served with the notice of levy by mail. Creditors now have 15 days to oppose the exemptions claimed by debtors.
In addition, SB 616 designates any funds in a debtor’s deposit account that are “equal to or less than the minimum basic standard of adequate care for a family of four” in California as exempt without the need for a debtor to file a claim of exemption. CCCP § 704.220(a). Currently, the Department of Social Services considers the amount needed to establish the basic standard of care to be $1,724, with a creditor not allowed to institute a garnishment that would bring the account below that figure. The amount is updated yearly. Additionally, any monies received from FEMA are automatically exempt without the need for a debtor to file a claim.
If a debtor has more than one account with the same bank or multiple accounts across multiple financial institutions, the creditor must request a hearing before a judge to determine how the exemption should be applied.
Currently, debt collectors time account seizures to occur when consumers have just been paid or have just received their federal earned income tax credit, and those seizures can potentially reduce a deposit account to $0. SB 616 will limit the extent to which debt collectors can obtain funds that would have otherwise been collectible under current California law. SB 616 does not, however, limit the ability of a debt collector to execute a judgment against the non-exempt personal assets of a judgment debtor.
These upcoming limitations may reduce the amounts debt collectors are able to collect. They will also force debt collectors in California to be increasingly vigilant in ensuring they are