BILL ANALYSIS Ó AB 1388 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1388 (Wieckowski) As Amended June 10, 2011 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |49-26|(May 2, 2011) |SENATE: |24-13|(August 29, | | | | | | |2011) | ----------------------------------------------------------------- ------------------------------------------------------------------------ |COMMITTEE VOTE: |6-3 |(September 6, 2011) |RECOMMENDATION: |concur | | | | | | | ------------------------------------------------------------------------ Original Committee Reference: JUD. 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 deletes the current exception for "common necessaries of life" to the general rule that exempts from wage garnishment 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, and makes other clarifying and conforming changes. The Senate amendments : 1)Delete the current exception for "common necessaries of life" to the general rule that exempts from wage garnishment 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. In other words, where the exemption from wage garnishment is currently unavailable for debts incurred for the "common necessaries of life," under the Senate amendments, the exemption would be available without regard to this former exception. 2)Clarify that the above exemption from wage garnishment remains unavailable for debts incurred pursuant to an order or award for the payment of attorney's fees in certain divorce, custody, and support cases (pursuant to Family Code Sections 2030, 3121, and 3557), as specified. AB 1388 Page 2 3)Make conforming changes to Government Code Section 68632 to correct a cross reference in that statute to the use of the term "common necessaries of life" as used in a paragraph deleted by this bill. 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. 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). 3)Provides 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 AB 1388 Page 3 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.) AS PASSED BY THE ASSEMBLY , this bill was substantially similar to the version approved by the Senate. 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 or her earnings needed for the support of the debtor and his or her family when the underlying debt was incurred for medical care for the debtor or his family. This bill makes this exemption from wage garnishment available to a judgment debtor where the underlying debt was incurred for medical care. As a result, this bill merely 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. However, the judgment debtor is not permanently relieved of any portion of the underlying medical debt under this bill. Section 706.051(c) of the Code of Civil Procedure provides that an exemption from wage garnishment for the support of a judgment debtor and his or her family "is not available if...Ýt]he debt was incurred for the common necessaries of life (emphasis added) furnished to the judgment debtor or the family of the judgment debtor." Case law, J.J. MacIntyre Co. v. Duren (1981) 118 Cal.App.3d Supp. 16, explicitly holds that medical care or hospital services constitute a "common necessary of life" for the purpose of determining whether the exception for common necessaries of life should apply to disallow the hardship exemption. Legal service attorneys contacted by the Judiciary Committee report that when judgment creditors file a notice of opposition to the claim of exemption in medical debt cases, they typically cite the "common necessaries of life" exception and the J.J. MacIntyre decision as the basis for which the claim of exemption should be denied by the court. AB 1388 Page 4 This bill deletes the existing exception to the hardship exemption for "common necessaries of life." In other words, where the hardship exemption from wage garnishment is currently unavailable for debts incurred for the "common necessaries of life," under the Senate amendments, the exemption would be available without regard to this former exception. In effect, this bill would permit but not require 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. The bill does not affect the right of a 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 or her earnings that he or she contends should be exempt from garnishment for the necessary support of his or her 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. Importantly, this bill does not discharge the underlying debt. Regardless of 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. The bill also clarifies that the above exemption from wage garnishment remains unavailable for debts incurred pursuant to an order or award for the payment of attorney's fees in certain divorce, custody, and support cases (pursuant to Sections 2030, 3121, and 3557 of the Family Code), as specified. 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. Finally, this bill makes conforming changes to Section 68632 of the Government Code (relating to waiver of court fees and costs) to correct a cross reference in that statute to the "common necessaries of life" provision deleted by this bill. These changes AB 1388 Page 5 are necessary to ensure that current application of those sections of the Family and Government Codes, in those particular contexts, remains unchanged by the deletion of the "common necessaries of life" exception under this bill. Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334 FN: 0002732