BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1388
                                                                  Page  1

          Date of Hearing:  September 6, 2011

                           ASSEMBLY COMMITTEE ON JUDICIARY
                                  Mike Feuer, Chair
                  AB 1388 (Wieckowski) - As Amended:  June 10, 2011

                                   FOR CONCURRENCE
           
          SUBJECT  :   EARNINGS WITHHOLDING ORDERS

           KEY ISSUE  :  AT A COURT HEARING TO DETERMINE A JUDGMENT DEBTOR'S 
          CLAIM OF EXEMPTION FROM WAGE GARNISHMENT PURSUANT TO A VALID 
          EARNINGS WITHHOLDING ORDER, SHOULD THE COURT BE ABLE TO GRANT 
          THE EXEMPTION IN CASES WHERE THE UNDERLYING DEBT WAS INCURRED 
          FOR MEDICAL CARE OR HOSPITAL SERVICES RENDERED TO THE JUDGMENT 
          DEBTOR OR HIS FAMILY?

                                      SYNOPSIS

          According to the author, the working poor in California remain 
          at risk of falling into hunger and homelessness when they are 
          unable to pay medical bills because existing case law 
          effectively prevents a judgment debtor from obtaining an 
          exemption from wage garnishment for that portion of his earnings 
          needed for the support of the debtor and his family (also known 
          as a "hardship exemption") when the underlying debt was incurred 
          for medical care for the debtor or his family.  This result 
          stems from the holding of J.J. MacIntyre Co. v. Duren (1981) 118 
          Cal.App.3d Supp. 16, where the court expressly held that medical 
          care or hospital services constitute a "common necessary of 
          life" under which CCP Section 706.051(c)(1) requires denial of a 
          claim of hardship exemption by a judgment debtor having such 
          medical debt.

          This bill seeks to make the hardship exemption from wage 
          garnishment available to a judgment debtor where the underlying 
          debt was incurred for medical care or hospital services.  In 
          order to avoid unintended consequences in the family law 
          arena--unrelated to medical debt--that may arise from deletion 
          of the "common necessaries of life" clause, the bill prudently 
          codifies an exception to the hardship exemption for orders or 
          awards for attorney's fees in certain family law proceedings, as 
          specified.  Under this bill, the judgment debtor is not 
          permanently relieved of any portion of the underlying medical 
          debt.  Instead, this bill allows the court in medical debt cases 








                                                                  AB 1388
                                                                  Page  2

          to consider the debtor's claim that his current financial 
          hardship requires a certain portion of his wages to be exempted 
          from wage garnishment for the support of the debtor and his 
          family, and allows the court to exercise its existing authority 
          to fashion a partial payment plan or otherwise modify the terms 
          of the earnings withholding order.  Supporters of the bill, 
          including several legal service providers, contend that the bill 
          simply levels the playing field by putting medical debt on equal 
          footing with other forms of unsecured debt, and that making the 
          hardship exemption available in cases of medical debt is 
          appropriate because it is often incurred involuntarily or may be 
          caused in large part by the improper actions of others.  The 
          bill is opposed by the California Association of Collectors, who 
          contends that the bill would create a vehicle for some consumers 
          to avoid paying their just debts while adding greater burdens 
          for those who do pay the debts they owe.


           SUMMARY  :  Allows the court to grant a judgment debtor's claim of 
          exemption from wage garnishment in cases where the underlying 
          debt was incurred for medical care or hospital services rendered 
          to the judgment debtor or his or her family.  Specifically,  this 
          bill:

           1)Deletes a statutory exception for "common necessaries of 
            life," thereby making the portion of the judgment debtor's 
            earnings that he or she proves is necessary to support himself 
            or herself and his or her family exempt from wage garnishment 
            if the underlying debt was incurred for the "common 
            necessaries of life" furnished to the judgment debtor or his 
            family.

          2)Codifies an exception for specified orders or awards for 
            attorney's fees in certain family law proceedings, thereby 
            preserving existing authority, pursuant to case law, to 
            garnish a judgment debtor's wages pursuant to an order or 
            award for the payment of attorney's fees in specified cases 
            relating to divorce, child custody, and child and spousal 
            support.

          3)Clarifies that a statutory reference to "common necessaries of 
            life" in the Government Code shall be interpreted consistently 
            with the use of that term as it read in Code of Civil 
            Procedure Section 706.051 prior to January 1, 2012.









                                                                  AB 1388
                                                                  Page  3

           EXISTING LAW  :


          1)Exempts from levy, with certain categorical exceptions, the 
            portion of a judgment debtor's earnings which the judgment 
            debtor proves is necessary for the support of the judgment 
            debtor or his or her family supported in whole or in part by 
            the judgment debtor.  (Code of Civil Procedure Section 
            706.051(b).)



          2)Provides that the above exemption is not available if any of 
            the following exceptions applies:  

             a)   The debt was incurred for the common necessaries of life 
               furnished to the judgment debtor or the family of the 
               judgment debtor;

             b)   The debt was incurred for personal services rendered by 
               an employee or former employee of the judgment debtor;

             c)   The order is a withholding order for support to collect 
               delinquent amounts payable under a judgment for the support 
               of a child, or spouse or former spouse, of the judgment 
               debtor; or,

             d)   The order is a state tax order, governed by Article 4 
               (commencing with Civil Code of Procedure (CCP) Section 
               706.070).   (Code of Civil Procedure Section 706.051(c).)

          3)Establishes that hospital services rendered to a judgment 
            debtor or his or her family constitute a "common necessary of 
            life" for which the debtor is not entitled to exemption from 
            levy or earnings withholding pursuant to CCP Section 706.051.  
            (J.J. MacIntyre Co. v. Duren (1981) 118 Cal.App.3d Supp. 16.)
           
           4)Establishes that the rendering of legal services and the 
            advancement of costs of litigation giving rise to a pendente 
            lite award to any attorney in a marriage dissolution action 
            qualify as "common necessaries of life" for the benefit of the 
            indigent spouse, thereby allowing enforcement of the award by 
            a writ of execution on the other spouse's earnings against a 
            claim of exemption of those earnings.  (In re Marriage of 
            Pallesi (1977) 73 Cal. App. 3d 424.)








                                                                  AB 1388
                                                                  Page  4


          5)Requires a court to grant an applicant permission to proceed 
            without paying court fees and costs because of his or her 
            financial condition if the applicant, as individually 
            determined by the court, cannot pay court fees without using 
            moneys that normally would pay for the common necessaries of 
            life for the applicant and the applicant's family.  Provides 
            that "common necessaries of life," as used here, shall be 
            interpreted consistently with the use of that term in 
            paragraph (1) of subdivision (c) of Section 706.051 of the 
            Code of Civil Procedure.  (Government Code Section 68632(c).)

           FISCAL EFFECT  :  None

           COMMENTS  :  According to the author, the working poor in 
          California remain at risk of falling into hunger and 
          homelessness when they are unable to pay medical bills because 
          existing case law effectively prevents a judgment debtor from 
          obtaining an exemption from wage garnishment for that portion of 
          his earnings needed for the support of the debtor and his family 
          when the underlying debt was incurred for medical care for the 
          debtor or his family.  To address this, the bill seeks to permit 
          judgment debtors to claim the exemption from wage garnishment in 
          cases where the underlying debt was incurred for medical care or 
          hospital services.  Under this bill, the judgment debtor is not 
          permanently relieved of any portion of the underlying medical 
          debt.  Instead, this bill allows the court in medical debt cases 
          to consider the debtor's claim that his current financial 
          hardship requires a certain portion of his wages to be exempted 
          from wage garnishment for the support of the debtor and his 
          family, and allows the court to exercise its existing authority 
          to fashion a partial payment plan or otherwise modify the terms 
          of the earnings withholding order.

           Claiming an Exemption from Wage Garnishment: A Procedural 
          Background  .  Under the Wage Garnishment Law (Chapter 5 of 
          Division 2 of Title 9 of Part 2 of the Code of Civil Procedure), 
          service of an earnings withholding order (EWO) creates a lien 
          upon the earnings of the judgment debtor that are required to be 
          withheld and in the specified amount to be withheld pursuant to 
          the order.  If no prior hearing has been held with respect to 
          the EWO (or there has been a material change in circumstances 
          since the time of the last prior hearing), then the judgment 
          debtor may claim an exemption from the EWO by filing a claim of 
          exemption and financial statement (forms both adopted by the 








                                                                  AB 1388
                                                                  Page  5

          Judicial Council) with the levying officer.  On the claim of 
          exemption form, the debtor attests that he needs either all or a 
          specified portion of his earnings to support himself or his 
          family.  On the financial statement, the debtor provides a 
          detailed account of his income and expenses that support his 
          claim that the court should approve an exemption.  
           
          Existing law requires a judgment creditor who desires to contest 
          a claim of exemption to file a notice of opposition to the claim 
          of exemption within 10 days after the required notice of claim 
          of exemption has been mailed to the creditor.  If the judgment 
          creditor files this notice of opposition with the levying 
          officer within the 10-day period, the judgment creditor is 
          entitled to a hearing on the claim of exemption, as specified.   
          If, however, the levying officer does not receive a notice of 
          opposition to the claim of exemption within the 10-day period, 
          then the EWO will effectively be terminated or modified, 
          depending on the particular claim of exemption made by the 
          judgment debtor.  For example, if all of the judgment debtor's 
          earnings were claimed to be exempt, the levying officer shall 
          serve the employer with a notice that the EWO has been 
          terminated.  If only a portion of the judgment debtor's earnings 
          was claimed to be exempt, then the levying officer shall serve a 
          modified EWO that reflects the amount of earnings claimed to be 
          exempt.  

          Because the EWO is either terminated or modified according to 
          terms proposed by the judgment debtor when the claim of 
          exemption is unopposed, current law provides an incentive to the 
          judgment creditor to file a notice of opposition-thus triggering 
          a hearing where the court shall determine the merit of the 
          judgment debtor's claim of exemption.  Not surprisingly, 
          according to the author, creditors oppose the claim of exemption 
          "nearly 100% of the time."
          
           Stated Need for the Bill.   According to the author, this bill is 
          needed to address consequences suffered by the working poor that 
          stem from case law interpreting Section 706.051(c) of the Code 
          of Civil Procedure.  That statute provides that an exemption 
          from wage garnishment for the support of a judgment debtor and 
          his family "is not available if...Ŭt]he debt was incurred for 
           the common necessaries of life  (emphasis added) furnished to the 
          judgment debtor or the family of the judgment debtor."  The 
          author states:









                                                                  AB 1388
                                                                  Page  6

               Amending this antiquated section of law by removing 
               Code Civ. Proc. § 706.051(c)(1) will merely give 
               individuals the opportunity to prove to a judge that 
               they can't currently afford a garnishment or levy. 
               Debtors cannot file Claims of Exemption from 
               garnishments and levies that stem from medical bills, 
               food, shelter or other common necessities of life. This 
               leads to the perverse situation in which someone who 
               runs up a huge gambling debt at a casino can escape 
               having his wages garnished, but a debtor taken to the 
               Ŭemergency room] after a car accident will lose 25% of 
               her wages till the medical bill is paid. 
                
               For low-income workers, wage garnishments can quickly 
               turn into homelessness and hunger. This is especially 
               cruel because medical debts are considered a common 
               necessity of life and are often the least voluntary of 
               debts: no one chooses to fall ill. With budget cuts to 
               Medi-Cal, Healthy Families, Indigent Care, and nearly 
               all other health-related programs, many more of the 
               working poor are going to have medical bills, 
               especially emergency room bills that they can't pay. 
               Eliminating § 706.051(c)(1) will not erase anyone's 
               debt for the common necessities of life. It will simply 
               provide for more reasonable repayment options to be 
               negotiated or for repayment to be delayed until it no 
               longer means disaster for the debtor's family.

           Statutory Interpretation of Section 706.051 and "Common 
          Necessaries of Life."   Subdivision (b) of Section 706.051 
          continues the hardship exemption from wage garnishment that has 
          existed, in one form or another, since at least 1933 and 
          possibly much earlier.  (See Former Section 690.6 added by 
          Stats. 1935 c.723, derived from Former Section 690, enacted in 
          1872.)  The basic theory of providing an exemption of wages 
          necessary for use of a judgment debtor's family is that the 
          debtor and his family, regardless of the debtor's improvidence, 
          will retain enough money to maintain a basic standard of living 
          in order that the debtor may have a fair chance to remain a 
          productive member of the community.  Perfection Paint Products 
          v. Johnson (1958, Cal App 1st Dist) 164 Cal App 2d 739.   In 
          addition, statutes exempting property from execution should be 
          fairly and liberally construed and, as far as practicable, 
          beneficially to the debtor.  Van Lue v. Wahrlich-Cornett Co. 
          (1910) 12 Cal App 749.  








                                                                  AB 1388
                                                                  Page  7


          In examining the legislative intent behind the exemption, the 
          court in White v. Gobey (1933) held that "necessities, then, 
          used for the very maintenance of the debtor's family, for food, 
          clothing and the like, are what the legislature meant to make 
          special provision for."  130 Cal. App. Supp. 789, 792.  

          Subdivision (c) specifies exceptions to the hardship 
          exemption-cases where the exemption is not allowed even though 
          the judgment debtor can show the necessity for exempting all or 
          part of his earnings.  The first such exception provides that an 
          exemption from wage garnishment for the support of a judgment 
          debtor and his family is not available if "the debt was incurred 
          for the common necessaries of life furnished to the judgment 
          debtor or the family of the judgment debtor."  In Los Angeles 
          Finance Co. v. Flores (Cal. App. Dep't Super. Ct. 1952), the 
          court, in ascertaining legislative intent behind the exception 
          for "common necessaries of life" concluded that "obviously, the 
          Legislature, cognizant of the fact that to the great majority of 
          persons supporting a family the earnings of the past 30 days are 
          required for such basic things as food, heat, shelter, etc. 
          (common to all), desired to make sure that these earnings shall 
          not be taken to pay for something less basic."  110 Cal. App. 2d 
          Supp. 850, 856.

          According to the Committee's research, J.J. MacIntyre Co. v. 
          Duren (1981) 118 Cal.App.3d Supp. 16 is the first case that 
          explicitly holds that medical care or hospital services 
          constitute a "common necessary of life" for the purpose of 
          determining whether the exception (currently articulated by 
          Section 706.051(c)(1)) should apply to disallow the hardship 
          exemption.  In J.J. MacIntyre Co., the Appellate Department of 
          the Superior Court of Los Angeles County held that the defendant 
          was not entitled to an earning exemption because "the underlying 
          debt was an assigned bill for hospital services rendered to the 
          defendant or his family . . . Ŭwhich] is a common necessary of 
          life."  118 Cal.App.3d Supp. 16, 19.  The court also stated "the 
          term 'common necessaries of life' . . . means essentials 
          commonly required by all persons for the sustenance of life, 
          whatever their employment status and includes medical care."  
          Id. at 19.

          Legal service attorneys contacted by the Committee report that 
          when judgment creditors file a notice of opposition to the claim 
          of exemption in medical debt cases, they typically cite CCP 








                                                                  AB 1388
                                                                  Page  8

          706.051 (c)(1) and the J.J. MacIntyre decision as the basis for 
          which the claim of exemption should be denied by the court.

           This bill does not discharge the underlying medical debt, but 
          allows the court to consider an exemption in medical debt cases.  
           In effect, by making the claim of exemption available in cases 
          of medical debt, this bill operates simply to give judgment 
          debtors the opportunity to prove that they cannot currently 
          afford a garnishment or levy for medical debt.   The court would 
          be allowed but not required to grant a judgment debtor's claim 
          of exemption from wage garnishment in cases where the underlying 
          debt was incurred for medical care or hospital services rendered 
          to the judgment debtor or his family.  The bill does not affect 
          the right of the debtor to file a claim of exemption, nor of a 
          creditor to file a notice of opposition to the claim to obtain a 
          court hearing to decide the matter.  

          Under this bill, the judgment debtor will still have to submit a 
          detailed financial statement to demonstrate the portion of his 
          earnings that he contends should be exempt from garnishment for 
          the necessary support of his family.  The court will still have 
          to determine the merit of the judgment debtor's claim of 
          exemption, but it would allow approval of the claim in cases of 
          medical debt where the court is currently constrained by the 
          J.J. MacIntyre decision.  This bill does not discharge the 
          underlying debt; whether the court approves the claim of 
          exemption or not, the underlying judgment is still valid and can 
          be collected in the future, including interest.

           Recent amendments narrow the scope of the bill to preserve 
          existing family law provisions unrelated to medical debt.   On 
          June 10, 2011, this bill was amended in the Senate to strike the 
          statutory exception for "common necessaries of life" from 
          Section 706.051.  In order to avoid unintended consequences in 
          the family law arena--unrelated to medical debt--that may have 
          arisen from deletion of that provision, the bill was also 
          amended, quite prudently, to codify the status quo exception to 
          the hardship exemption for orders or awards for attorney's fees 
          in certain family law proceedings, as specified.  As a result, 
          the June 10 amendments effectively preserve the existing ability 
          of a judgment creditor, pursuant to case law, to garnish a 
          judgment debtor's wages pursuant to an order or award for the 
          payment of attorney's fees in certain cases relating to divorce 
          (Family Code Section 2030), child custody (Family Code Section 
          3121), and child and spousal support (Family Code Section 3357).








                                                                  AB 1388
                                                                  Page  9


          By preserving the ability to garnish wages for payment of 
          court-ordered family law attorney fees, even when those wages 
          are needed to support the debtor's family, this bill would 
          preserve the court's holding in In re Marriage of Pallesi (1977) 
          73 Cal. App. 3d 424.  In that case, the Court of Appeal (5th 
          Appellate District) held that:

               The rendering of legal services and the advancement of 
               costs of litigation giving rise to a pendente lite award to 
               any attorney in a marriage dissolution action clearly 
               qualify as "common necessaries of life" for the benefit of 
               the indigent spouse, thereby giving the attorney the right 
               to enforce the award by writ of execution on the other 
               spouse's earnings against a claim of exemption of those 
               earnings. (Id. at 427-28.)  

          The Court further explained the public policy rationale for its 
          holding:

               ŬT]here is a strong public policy favoring the payment of 
               court-approved attorney's fees and costs. If by an act of 
               reconciliation a debtor spouse can escape liability for 
               payment of the fees and costs, it would become difficult 
               for indigent spouses to obtain legal counsel in marital 
               dissolution proceedings. Furthermore, if a pendente lite 
               order for attorney's fees and costs is not enforceable by 
               execution against the earnings of the debtor spouse after 
               reconciliation, counsel in dissolution proceedings will 
               be encouraged to levy wage garnishments immediately upon 
               obtaining an unconditional order for fees and costs, 
               contrary to the strong public policy favoring 
               reconciliation.  (Id. at 427-28.)  

          In short, the Senate amendments narrow, not broaden, the scope 
          of the bill to ensure that its effect is only with respect to 
          wage garnishment in medical debt cases, and to ensure it does 
          not upset existing law or public policy unrelated to medical 
          debt.  The bill effectively preserves the status quo with 
          respect to wage garnishment and court orders for attorney fees 
          in certain family law matters, and does not create new rights or 
          means of enforcing these orders.

           This bill also preserves case law with respect to court 
          evaluation of fee waiver applications, unrelated to medical 








                                                                 AB 1388
                                                                  Page  10

          debt.   Existing Government Code Section 68632 provides that 
          "common necessaries of life," as used in the Article 6 of 
                                                   Chapter 2 of Title 8 of the Government Code, shall be 
          interpreted consistent with the use of the term in Code of Civil 
          Procedure Section 706.051, a code section amended by this bill.  
          Section 68632(c) provides courts discretionary authority to 
          grant a fee waiver for persons who are not on public assistance, 
          as specified.  In order to preserve the case law regarding the 
          definition of that term under CCP Section 706.051, this bill 
          would amend Govt. Code Section 68632 to clarify that the 
          reference to "common necessaries of life" refers to CCP Section 
          706.051 as it read prior to January 1, 2012, the effective date 
          that section would be changed if this bill is chaptered into 
          law.  This clarification seeks to ensure that this bill will 
          preserve existing interpretation of the term "common necessaries 
          of life" under the Government Code for the purpose of a court's 
          evaluation of fee waiver applications. Without this clarifying 
          language, an unintended consequence may be the elimination of 
          guidance for how hearing officers should decide whether to grant 
          fee waivers to low-income persons in certain civil and family 
          law matters.
           
          Studies indicate an increasing percentage of bankruptcy filings 
          are associated with illness and medical bills and that medical 
          debt is largely involuntary.   In a 2009 study published in the 
          American Journal of Medicine, Harvard researchers surveyed a 
          random national sample of 2314 bankruptcy filers in 2007, 
          abstracted their court records, and interviewed 1032 of them.  
          Debtors were designated as "medically bankrupt" if they: (1) 
          cited illness or medical bills as a specific reason for 
          bankruptcy; OR (2) reported uncovered medical bills greater than 
          $1000 in the past two years; OR (3) lost at least 2 weeks of 
          work-related income due to illness or injury; OR (4) mortgaged a 
          home to pay medical bills.  Using these criteria, the 
          researchers found that illness or medical bills contributed to 
          62.1% of all bankruptcies, and in 92% of these "medical 
          bankruptcies," the debtor had a medical debt over $5000, or 10% 
          of pretax family income.

          In comparing this data with the results from a previous 2001 
          study employing identical methodology, the researchers were able 
          to determine that the share of bankruptcies attributable to 
          medical problems rose by 49.6% from 2001 to 2007, and that after 
          controlling for demographic factors, the odds that a bankruptcy 
          had a medical cause was 2.38 fold higher in 2007 than in 2001.  








                                                                  AB 1388
                                                                  Page  11

          Telephone interviews of the 639 identified patients whose 
          illness contributed to bankruptcy revealed the severity of job 
          problems caused by illness.  The researchers found that in 37.9% 
          of patients' families, someone had lost or quit a job because of 
          the medical event; 24.4% had been fired, and only 37.1% 
          subsequently regained employment.  (Himmelstein D., Thorne D., 
          et al.  Medical Bankruptcy in the United States, 2007:  Results 
          of a National Study.  American Journal of Medicine, Vol. 122, 
          No. 8, August 2009.)  

          In 2004, the Health Consumer Alliance of California (HCA) 
          published a study titled "Sick and in Debt" that documents cases 
          of how consumers got into medical debt at no fault of their own. 
           The HCA report concludes that medical debt is largely 
          involuntary and not caused by financial irresponsibility.  The 
          report's executive summary states:

               The public perception is that medical debt happens 
               primarily to consumers who are financially 
               irresponsible. HCA data brings to light many improper, 
               and sometimes illegal, practices by state 
               administrators and providers that cause medical debt to 
               fall on low-income consumers. The medical debt of HCA 
               consumers is caused in large part by the improper 
               actions of others.

               Medical debt dashes the future hopes and dreams of 
               low-income individuals. An expensive, unplanned trip to 
               the hospital can mean higher education is postponed or 
               never pursued. A credit record with outstanding debt 
               effectively prevents many families from realizing the 
               dream of home ownership. Outstanding debt means that 
               precious family resources are directed to debt 
               servicing, not to other family needs. 

           ARGUMENTS IN SUPPORT  :  This bill is supported by a number of 
          legal service providers who report serving low-income families 
          who often face wage garnishments.  These supporters, including 
          the Western Center on Law and Poverty (WCLP), California Rural 
          Legal Assistance Foundation, and East Bay Community Law Center, 
          contend generally that extending the protection of the hardship 
          exemption to medical debt cases will help ensure that working 
          Californians in those situations can exempt from wage 
          garnishment the basic income necessary to support their families 
          and avoid being forced into hunger or homelessness.  For 








                                                                  AB 1388
                                                                  Page  12

          example, Western Center writes in support:

               Under AB 1388 these harsh outcomes on families can be 
               partially limited. While families would still be 
               responsible for debt they owe (even if unfairly 
               incurred), they could not have their income taken by a 
               medical debt collector. Instead the debt collector will 
               have to negotiate with the family to establish a 
               repayment method. This gives the family the final 
               decision on how their earnings are to be spent and to 
               ensure that families can take care of the basic 
               necessities of life.

          The Consumer Attorneys of California (CAOC) also writes in 
          support, stating that the bill "protects California's working 
          poor by putting medical debt on equal footing with other forms 
          of unsecured debt."  CAOC further states, "Understanding that 
          exemptions are available to debtors in other situations, it is 
          cruel and unjustifiable that our law disfavors those who fall 
          into (medical) debt as a result of unforeseeable, inescapable 
          health emergencies."

           ARGUMENTS IN OPPOSITION  :  The California Association of 
          Collectors (CAC) opposes this bill for a variety of reasons.  In 
          their opposition letter, CAC states:

               The entire public policy rationale for excluding common 
               necessaries of life from the claim of exemption process 
               was to protect consumers from creditors refusing to 
               extend credit for those necessaries.  The net effect of 
               taking medical care and hospital services out of the 
               definition will be to encourage health care providers 
               to demand payment prior to rendering of services.  
               Consumers will be forced to pay using bank credit cards 
               with higher interest rates and penalties.
                
               In addition, this bill would create an unintended, 
               unjust and negative impact on the largest number of 
               consumers that pay without the need for legal action 
               and it will force the medical providers to request 
               payment from all consumers up front. . . This bill 
               would create a vehicle for those consumers to avoid 
               paying their just debts while adding greater burdens 
               for those who pay their just and owing medical debts. . 
               . AB 1388 seeks a back-door approach, post judgment, to 








                                                                  AB 1388
                                                                  Page  13

               try to avoid repayment of legal debts already incurred. 
                It takes away the most effective legal tool to 
               implement repayment where a court has already 
               established the legal obligation for services rendered 
               where there is no dispute.

          USCB, Inc., which describes itself as an "accounts receivable 
          management company specializing in medical receivable services," 
          contends that this bill would "further frustrate the ability of 
          creditors to collect debts which are lawfully owed."  USCB also 
          asserts that "debtors will be able to increase the likelihood 
          that they will escape having to pay debts they lawfully owe.  As 
          a result, creditors will be forced to charge higher interest 
          rates to those consumers who do pay their debts."

          With respect to the accountability of debtors, despite these 
          contentions it should be noted that this bill does not act to 
          discharge any underlying judgment debt, medical or otherwise.  
          Ultimately, judgment debtors would still be responsible for 
          paying for services rendered, as is true under existing law.  
          The hardship exemption, which would be made available to medical 
          debt cases, protects from garnishment only that portion of the 
          judgment debtor's earnings that are necessary to support the 
          debtor and his family for the statutory lien period created by 
          the earnings withholding order, but does not excuse the debt 
          itself.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          American Federation of State, County and Municipal Employees 
          (AFSCME)
          California Church Impact
          California Employment Lawyers Association (CELA) 
          California Labor Federation
          California National Organization of Women
          California Rural Legal Assistance Foundation
          California School Employees Association
          Consumer Attorneys of California
          East Bay Community Law Center
          Los Angeles Center for Law and Justice
          Western Center on Law and Poverty 

           Opposition 








                                                                 AB 1388
                                                                  Page  14

           
          California Association of Collectors
          USCB, Inc.
           

          Analysis Prepared by  :    Anthony Lew / JUD. / (916) 319-2334