BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2013-2014 Regular Session
AB 567 (Wagner)
As Introduced
Hearing Date: June 4, 2013
Fiscal: No
Urgency: No
TH
SUBJECT
Enforcement of Money Judgments: Exemptions
DESCRIPTION
This bill would remove an existing requirement directing the
California Law Revision Commission to review the statutory
dollar amounts of personal property exempted from the
enforcement of monetary judgments every ten years, and to
recommend to the Governor and the Legislature any necessary
changes regarding those amounts. It would retain the
Commission's existing authorization to continually review and
submit recommendations concerning the enforcement of monetary
judgments.
BACKGROUND
Under existing law, certain dollar amounts of various types of
personal property are exempt from civil judgment and cannot be
seized or sold to satisfy a court judgment entered against an
individual. (See Code Civ. Proc. Sec. 704.010 et seq.) For
example, the Code of Civil Procedure currently exempts, among
other things, $7,175 worth of jewelry, heirlooms, and works of
art owned by a debtor, and $2,875 worth of materials used to
repair or maintain a residence, from being used for the
satisfaction of a money judgment. (Code Civ. Proc. Secs.
704.030, 704.040.) These personal property exemptions are
designed to ensure that a debtor maintains the ability to
support himself or herself, as well as dependent family members,
after the entry of judgment, and also to facilitate the debtor's
financial recovery.
(more)
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To account for inflation and other changes in consumer prices,
existing law directs the California Law Revision Commission to
review the statutory dollar amounts of personal property
exempted from the enforcement of monetary judgments every ten
years, and to recommend "any changes in exempt amounts that
appear proper." (Code Civ. Proc. Sec. 703.120.) Existing law
also directs the Commission to study and recommend similar
revisions to the value of personal property subject to either
state bankruptcy exemptions or to county actions for the
recovery of general assistance funds. The Commission's first
two decennial reviews (completed in 1994 and 2003) recommended
inflation-based adjustments to the exemption amounts, which the
Legislature subsequently enacted into law. (See SB 832 (Kopp,
Chapter 196, Statutes of 1995); AB 182 (Harman, Chapter 379,
Statutes of 2003).) The second decennial review also
recommended the creation of a new statutory cost of living
adjustment (COLA) mechanism to automatically increase the
exemption amounts every three years.
The Legislature responded to the second decennial review by
passing AB 182 (Harman, Chapter 379, Statutes of 2003) (codified
in part at Code Civ. Proc. Sec. 703.150). Among other things,
that bill created a statutory mechanism that automatically
increases the value of personal property exempted from monetary
judgments and bankruptcy filings every three years in line with
changes in California's Consumer Price Index. It directs the
Judicial Council of California to "determine the amount of the
adjustment based on the change in the annual California Consumer
Price Index for All Urban Consumers," and to publish the
adjusted figures together with the date of the next scheduled
adjustment. (See Code Civ. Proc. Sec. 703.150.)
The California Law Revision Commission, the sponsor of this
bill, states that with the advent of the automatic COLA
mechanism, the existing decennial review provision has become
outdated and unnecessary. In its third decennial review, which
was completed in December 2012, the Commission found that "the
automatic COLA mechanism has been operating as intended," and
"[c]onsequently, the statutory exemption amounts do not require
manual adjustment at this time." (California Law Revision
Commission, Third Decennial Review of Exemptions from
Enforcement of Money Judgments < http://
www.clrc.ca.gov/pub/Printed-Reports/Pub237-D356.pdf> [as of May
13, 2013].) The Commission's report went on to state that
"[b]ecause the COLA mechanism is properly adjusting the
exemption amounts to account for inflation, the Commission sees
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no need for further decennial review of the exemption amounts,"
and "[t]he Commission therefore recommends that the decennial
review requirement be repealed." (Id.)
CHANGES TO EXISTING LAW
Existing law provides for twenty-one specific exemptions that
limit the enforceability of a money judgment against a debtor's
personal property, including motor vehicles, residential
improvement materials, jewelry, heirlooms, and works of art,
tools and implements used in the exercise of the debtor's trade,
business or profession, public benefit accounts, inmate trust
funds, and unmatured life insurance policies. (Code Civ. Proc.
Sec. 704.010 et seq.)
Existing law makes eleven similar specific exemptions available
to debtors in personal bankruptcy proceedings. (Code Civ. Proc.
Sec. 703.140.)
Existing law provides for subsistence level exemptions that
limit reimbursement claims from reaching certain personal
property acquired by persons for the support of whom public
moneys have been expended. (Welf. & Inst. Code Sec. 17409.)
Existing law requires the California Law Revision Commission to
review the exempt amounts provided in statutes related to the
enforcement of civil judgments and in other statutes every ten
years, and recommend to the Governor and the Legislature any
changes in exempt amounts that appear proper. (Code Civ. Proc.
Sec. 703.120.)
Existing law also requires the Judicial Council of California to
adjust the dollar amounts of exemptions provided in statutes
related to the enforcement of civil judgments and in personal
bankruptcy proceedings every three years based on the change in
the California Consumer Price Index for All Urban Consumers.
(Code Civ. Proc. Sec. 703.150.)
This bill would delete the requirement that the California Law
Revision Commission make the decennial recommendations, while
retaining the Commission's general authority to study, review,
and make recommendations regarding the enforcement of monetary
judgments.
COMMENT
1. Stated need for the bill
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The author writes:
The Commission recently completed its third decennial
review. It found that the automatic COLA mechanism has
been operating as intended. As the statutory exemption
amounts no longer require manual adjustment to account for
inflation, AB 567 will remove the statutes requiring manual
adjustments be performed.
. . .
[This bill] [r]emoves [the] requirement of decennial review
of amounts exempted from the enforcement of money
judgments.
2. California Law Revision Commission - Scope of past decennial
reviews
Since 1953, the California Law Revision Commission has studied
various topics designated by the Legislature with the purpose of
"discovering defects and anachronisms in the law and
recommending needed reforms." (Govt. Code Sec. 8289(a).) For
the past thirty years, the Legislature has tasked the Commission
with studying and formulating recommendations concerning the
statutory exemptions made available to debtors engaged in
personal bankruptcy proceedings and against whom creditors have
obtained monetary judgments. The Commission's review authority
is not limited to examining the dollar amount of these statutory
exemptions, but extends generally to the enforcement of all
civil judgments. (See Code Civ. Proc. Sec. 703.120(b) [". . .
the commission is authorized to maintain a continuing review of
and submit recommendations concerning enforcement of
judgments."].) Indeed, the most recent joint resolution
designating topics for the Commission's study directed it to
examine California law in twenty-three distinct fields,
including the civil law relating to creditors' remedies. (See
ACR 98 (Wagner, Chapter 108, Statutes of 2012).) However,
unlike those broader studies, the decennial reviews mandated by
Code of Civil Procedure Section 703.120 are only required to
address the exemption dollar amounts themselves.
To date, the Commission has produced three decennial reviews
concerning personal property exempted from the enforcement of
money judgments. In the most recent decennial review, the
Commission notes that "[h]istorically, [it] has not gone beyond
that narrow mandate" in Section 703.120 of simply examining the
statutorily exempt dollar amounts, and in particular the
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accumulated impact of inflation on these amounts since the last
legislative adjustment. (California Law Revision Commission,
Third Decennial Review of Exemptions from Enforcement of Money
Judgments, at p. 3.) In the Commission's view, "any major
rebalancing of the equities of the existing exemption scheme
should be addressed by the Legislature through the political
process." (Id. at p. 3.) Considering solely the need to adjust
these statutory exemptions in response to inflationary pressure,
the Commission makes the following recommendation:
Current law appears to provide an adequate means for automatic
adjustment of the exemption amounts over time, without the
need for the Commission to periodically review those amounts
and manually adjust them. In fact, the automatic adjustments
appear to be superior to the Commission's decennial review
process, because the adjustments take place at three-year
intervals, rather than every 10 years . . . For those reasons,
the Commission recommends that the decennial review
requirement be repealed. (Id. at p. 6.)
This bill, consistent with the recommendation above, would
eliminate the statutory requirement that the California Law
Revision Commission make decennial recommendations pursuant to
Code of Civil Procedure Section 703.120, but would retain the
Commission's general authority to study, review, and make
recommendations regarding the enforcement of money judgments.
3. Exemptions not subject to automatic COLA adjustments
Under current law, there are two personal property exemptions
included within the scope of the California Law Revision
Commission's decennial review that are not subject to the
Judicial Council's automatic inflation-related COLA adjustments.
First, funds held in trust for correctional facility inmates
are explicitly excluded from being automatically adjusted by the
statutory COLA adjustment mechanism. (See Code Civ. Proc. Sec.
704.090 ["The exemption provided in this subdivision is not
subject to adjustment under Section 703.150"].) Second, the
Welfare and Institutions Code provides for certain subsistence
level exemptions that limit county reimbursement claims from
reaching the personal property of individuals receiving public
assistance. (See Welf. & Inst. Code Sec. 17409.) These latter
exemptions are not included in the triennial COLA adjustment
mechanism because that mechanism is statutorily limited to
exemptions codified in Sections 703 and 704 of the Code of Civil
Procedure. (See Code Civ. Proc. Sec. 703.150 [automatic
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adjustments limited to subdivision (b) of Section 703.140 and
Article 3 of the Enforcement of Judgments Law (Code Civ. Proc.
Sec. 680.010 et seq.)].) These two sets of exemptions do,
however, fall within the Commission's existing scope of review.
(See Code Civ. Proc. Sec. 703.120(a) [Commission "shall review
the exempt amounts provided in this chapter and in other
statutes . . ."].)
While removing the Commission's decennial review requirement
would eliminate a future report that could recommend further
examination of these statutory exemptions, advocates of the two
respective constituencies can always independently petition the
Legislature to change these exemption amounts, and the
Legislature can similarly act to change these amounts on its own
accord. It should be noted that the Commission's latest
decennial report did not recommend any adjustment to these
statutory exemptions, and stated that changes to the exemptions
for inmate trust funds "is fundamentally a political question
that is best decided by the Legislature and the Governor."
(California Law Revision Commission, Third Decennial Review of
Exemptions from Enforcement of Money Judgments, at p. 3.)
Support : None Known
Opposition : None Known
HISTORY
Source : California Law Revision Commission
Related Pending Legislation : AB 198 (Wieckowski) would create
additional new categories of property exemptions available to
debtors and would raise the amount of the homestead exemption
from between $75,000 and $175,000 to between $200,000 and
$400,000. This bill is in the Assembly Appropriations Committee
and has been held under submission.
Prior Legislation :
ACR 98 (Wagner, Chapter 108, Statutes of 2012) directs the
California Law Revision Commission to examine California law in
twenty-three distinct fields, including the civil law relating
to creditors' remedies.
AB 929 (Wieckowski, Chapter 678, Statutes of 2012) increased the
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dollar amount of the exemptions for a debtor's interest in motor
vehicles, jewelry, professional books, and tools of the trade of
the debtor or the debtor's dependent, and also increased the
amount of the homestead exemption for persons 55 years of age or
older who meet specified low-income criteria.
AB 2328 (Olsen, 2012) would have eliminated the California Law
Revision Commission, including its responsibility to produce
decennial reports concerning personal property exempted from the
enforcement of money judgments. This bill failed passage in the
Assembly Judiciary Committee.
AB 1046 (Anderson, Chapter 499, Statutes of 2009) raised the
amounts of a debtor's homestead exemption by $25,000 in each
available category, establishing the current statutory levels of
$75,000, $150,000, and $175,000.
AB 182 (Harman, Chapter 379, Statutes of 2003) raised the dollar
amounts a debtor may claim for exemptions from enforcement of a
money judgment and in bankruptcy actions in line with decennial
recommendations of the California Law Revision Commission. This
bill also directed the Judicial Council of California to
triennially adjust the dollar amounts for bankruptcy and money
judgment exemptions based on changes in the California Consumer
Price Index for All Urban Consumers.
SB 832 (Kopp, Chapter 196, Statutes of 1995) raised the dollar
amounts a debtor may claim for exemptions from enforcement of a
money judgment and in bankruptcy actions in line with decennial
recommendations of the California Law Revision Commission.
AB 707 (McAlister, Chapter 1364, Statutes of 1982) codified the
Enforcement of Judgments Law (Code Civ. Proc. Sec. 680.010 et
seq.), including the statutory dollar amount of personal
property exempted from the enforcement of monetary judgments.
Prior Vote :
Assembly Judiciary Committee (Ayes 9, Noes 0)
Assembly Floor (Ayes 75, Noes 0)
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