BILL ANALYSIS �
AB 1321
Page 1
Date of Hearing: January 10, 2012
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 1321 (Wieckowski) - As Amended: January 4, 2012
As Proposed to Be Amended
SUBJECT : MONEY JUDGMENTS: EARNINGS WITHHOLDINGS: CLAIMS OF
EXEMPTION
KEY ISSUE : IN ORDER TO ASSIST LOW-INCOME FAMILIES FOR WHO WAGE
GARNISHMENT WOULD CREATE GREAT FINANCIAL DISTRESS, SHOULD
CALIFORNIA LAW AUTHORIZING CLAIMS OF EXEMPTION BE CHANGED TO
ALLOW A JUDGMENT DEBTOR TO OBTAIN A TEMPORARY STAY OF WAGE
GARNISHMENT UNTIL THE COURT HEARING TO DECIDE THE DEBTOR'S CLAIM
OF EXEMPTION?
FISCAL EFFECT : As currently in print this bill is keyed
fiscal.
SYNOPSIS
Existing California law allows a judgment debtor to file a claim
of exemption from wage garnishment for the portion of wages
needed to support the debtor and his or her family. This bill
seeks to modify this process to allow a debtor to easily obtain
a temporary stay on wage garnishment for the period between the
filing of the claim and the hearing date for the court to enter
judgment on the claim.
According to the author, this intervening period can last
several weeks or even months, which, the author contends, can be
disastrous for working families that are living from one
paycheck to the next. To mitigate this potential impact, this
bill seeks to ensure that a judgment debtor is entitled to have
the amount of earnings withheld by his or her employer reduced
to the extent that the debtor may retain the amount of earnings
needed to support himself and his family, as indicated on the
claim of exemption form-but only until such time as the required
court hearing to decide the merits of the exemption claim. For
these reasons, the bill is supported by the Western Center on
Law and Poverty.
The bill is opposed by the California Association of Collectors
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(CAC), who characterizes it as an unreasonable solution that
will "injure creditors and employers and cause abuses of the
system", along with other unintended consequences.
Specifically, CAC contends that this bill will lead to "legal
mills" that will abuse the tactic of seeking a claim of
exemption to delay wage garnishment in all collection cases,
whether truly deserved or not. CAC also contends, among other
things, that this bill unfairly tilts the balance of power
towards one stakeholder group (i.e. garnishees) involved in
current discussions seeking to address the impact of court
closures and greater difficulty in scheduling trials and
hearings. In addition, CAC is opposed to hearing the bill at
this time based on general process concerns associated with the
short length of time the current provisions of the bill have
been in print.
The author proposes to amend the bill further to address
implementation issues raised by the Judicial Council, facilitate
electronic transmission of documents, and protect sensitive
financial information belonging to judgment debtors. As
proposed to be amended, these provisions would not take effect
until July 1, 2013 if chaptered into law.
SUMMARY : Modifies the procedure for handling a judgment
debtor's claim of exemption from wage garnishment.
Specifically, this bill :
1)Requires the levying officer, after the judgment debtor files
the claim of exemption, to promptly serve the judgment
debtor's employer with a copy of the original earnings
withholding order (EWO), a copy of the claim of exemption, and
an instruction, signed by the levying officer, as specified.
2)Requires an employer, once served with the above documents, to
comply with the instruction to immediately, and until further
notice, reduce the amount of earnings to be withheld under the
original EWO to reflect the amount of additional earnings
claimed by the judgment debtor to be exempt in the claim of
exemption. Further requires the employer to immediately cease
withholding any earnings whatsoever if the judgment debtor's
claim of exemption asserts that all of his or her earnings are
exempt.
3)Requires the levying officer, if he or she does not receive a
notice of opposition to the claim of exemption within a
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specified period of time, to serve upon the employer a notice
that the employer shall continue withholding earnings only to
the extent, if any, that the employer has been withholding
earnings pursuant to the instruction previously served by the
levying officer.
4)Provides that, if after a hearing on the claim of exemption,
the court denies the judgment debtor's claim in whole or in
part, the clerk shall promptly transmit a certified copy of
the court's order to the levying officer, who shall promptly
serve the employer a notice that employer shall withhold
earnings pursuant to the court's order.
EXISTING LAW :
1)Provides that service of a EWO creates a lien upon the
earnings of the judgment debtor that are required to be
withheld pursuant to the order and upon all property of the
employer subject to the enforcement of a money judgment in the
amount required to be withheld pursuant to such order. Also
provides that the lien continues for a period of one year from
the date the earnings of the judgment debtor become payable
unless the amount required to be withheld pursuant to the
order is paid as required by law. (Code of Civil Procedure
Section 706.029. Unless stated otherwise, all further
statutory references are to this code.)
2)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. (Section 706.051(b).)
3)Permits a judgment debtor to claim an exemption if no prior
hearing has been held with respect to the EWO, or if there has
been a material change in circumstances since the time of the
last prior hearing on the EWO. (Section 706.105(a).)
4)Specifies the procedural requirements by which a judgment
debtor may claim an exemption from the earnings withholding
order, and by which a judgment creditor may contest a claim of
exemption in order to obtain a court hearing to evaluate the
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merit of the claim. (Section 706.105, (b) to (d).)
5)Entitles the judgment creditor to a hearing on the claim of
exemption upon filing a notice of opposition, and provides
that if no notice of opposition is filed, the debtor's
earnings may be withheld by the employer only to the extent
reflected by the amount of earnings claimed to be exempt in
his or her claim of exemption. (Section 706.105 (e) and (f).)
6)Provides that the amount of earnings of a judgment debtor
exempt from the levy of an earnings withholding order, except
as specified, shall be that amount that may not be withheld
from the judgment debtor's earnings under federal law in
Section 1673(a) of Title 15 of the United States Code.
(Section 706.050.)
7)Provides that the maximum part of the aggregate disposable
earnings of an individual for any workweek which is subject to
garnishment may not exceed 25 per centum of his disposable
earnings for that week, or the amount by which his disposable
earnings for that week exceed thirty times the Federal minimum
hourly wage in effect at the time the earnings are payable,
whichever is less. (15 U.S.C. � 1673.)
COMMENTS : According to the author, existing California law that
allows a judgment debtor to file a claim of exemption from wage
garnishment with the court and obtain a hearing on the claim may
be insufficient to protect many low-income persons as intended.
This deficiency arises because the intervening period between
the time a judgment debtor initially files a claim of exemption
and the court enters its judgment on the claim can last many
weeks or months, and this length of time, the author contends,
can be disastrous for families that are living from one paycheck
to the next. To mitigate this potential impact, this bill seeks
to ensure that a judgment debtor is entitled to have the amount
of earnings withheld by his or her employer reduced to the
extent that the debtor claims those earnings are exempt-but only
until such time as the required court hearing to decide the
merits of the claim of exemption. In effect, this amounts to a
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temporary stay on garnishment of some or all of the judgment
debtor's wages, as claimed by the debtor, during the period
between when the claim is filed and when the court decides the
claim after a hearing.
Stated Need for the Bill. According to the author, this bill is
needed to address the problems faced by some working families in
California who may suffer financial harm while waiting for a
hearing on a claim of exemption from wage garnishment. The
author states:
With California courts becoming increasingly
overburdened by budget cuts, decreased staff support,
and office closures and consolidations, the already
extended timeline between a debtor filing a claim of
exemption and a levying officer promptly serving a
copy of a court order will only continue to grow.
With every passing over-garnished paycheck, a debtor
and his family can face eviction due to inability to
pay rent, repossession of a vehicle, disconnection of
utilities, or even bankruptcy. By requiring that the
employer modify the garnishment ahead of a hearing, a
debtor will have access to needed funds within a more
reasonable time, allowing him to stay afloat, pay
bills and avoid further financial distress.
Claiming an Exemption from Wage Garnishment: A Procedural
Background . Under the Wage Garnishment Law, service of an
earnings withholding order 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. (Section
706.029.) 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 wage garnishment by filing a claim of
exemption and financial statement (both are Judicial
Council-approved forms) with the levying officer. (Section
706.105(a)-(b).) 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. (Judicial Council Form WG-006.)
Existing law requires a judgment creditor who desires to contest
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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. (Section
706.105(d).) 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. (Section 706.105(e).) 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. (Section 706.105(f).)
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 claim
of exemption.
This bill does not discharge the underlying debt or the criteria
by which a claim of exemption is judged, but does temporarily
stay wage garnishment until a hearing is held to decide the
claim of exemption. Under existing law governing the claim of
exemption process, the wages of a judgment debtor may be
garnished for the entire interim period between the filing of
the claim and the court hearing on the matter. If the court
decides that the claim of exemption is valid and modifies the
EWO, then existing law provides for the refund of wages to the
employee already withheld by the employer pursuant to the
original EWO, but without any interest or penalty for the time
that the employee/debtor could not access those wages. If, on
the other hand, the court decides the claim of exemption is
invalid, then existing law simply authorizes wage garnishment to
continue pursuant to terms of the EWO, or as otherwise directed
by the court.
Nothing in this bill acts to discharge any part of the
underlying debt or change the criteria by which a claim of
exemption is evaluated by a court. The bill does not affect the
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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. Instead, the bill
temporarily stays wage garnishment until the court hearing to
decide the claim of exemption on its merits. During this lag
time, either the debtor or the creditor must bear this temporary
burden. Opponents correctly point out that the bill shifts the
temporary financial burden from the back of the judgment debtor
to that of the judgment creditor during the intervening period
of time before the hearing. On the other hand, this bill
reflects the apparent view of its proponents that such a policy
shift is warranted because, more often than not, the judgment
debtor in financial distress is less likely to be able to bear
this burden than the creditor, particularly in cases like these
where the debtor has declared under penalty of perjury that some
or all of his earnings are needed to support himself and his
family and should therefore be exempt from garnishment.
Proposed Author's Amendments : To address implementation issues
at the request of the Judicial Council, who pursuant to Section
706.120 is responsible for prescribing forms and notices
implemented by this bill, the author proposes to amend the bill
to have an effective start date of July 1, 2013. In addition,
the author proposes additional amendments that are intended to
accommodate the electronic provision of documents by court
clerks, as well as to clarify that the judgment debtor's
financial statement, which discloses private financial
information about the debtor, need not and shall not be served
upon his or her employer with the copy of the claim of exemption
(to which it is often attached when handled by court staff.)
The amendments are:
On page 3, line 18, after "debtor" insert ", unaccompanied
by the financial statement"
On page 6, line 10, strike "a certified copy" and insert
"or provide by mail, facsimile, email, or other electronic
means a copy"
On page 7, line 12, insert the following: "SEC. 3. The
provisions of this act shall take effect on July 1, 2013."
On page 7, line 13, insert the following: "SEC. 4. The
Judicial Council shall, on or before July 1, 2013, adopt
any necessary revisions to any notices, claims of
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exemptions, orders, or other documents specified in section
706.120 in order to implement the provisions of this act."
ARGUMENTS IN SUPPORT : In support of the bill, Western Center on
Law and Poverty (WCLP) contends that this bill will help ensure
that workers and their families are not harmed by "improper"
wage garnishment during the period of time that the worker is
waiting for a court hearing on his or her claim of exemption in
cases where the merit of that claim is ultimately validated by
the court. Although California law provides that the hearing on
the claim of exemption shall occur within 30 days, WCLP reports:
In practice, hearings on claims of exemption often
exceed the legal time frame in the statute. One legal
service program reports that they helped a client file
a claim of exemption in late May this year; the
hearing on the claim of exemption was in July, and the
garnishment didn't halt until mid-August. Thus, for
three months, earnings were taken from the family
unjustly.
WCLP further explains why it feels the bill is necessary to
offer additional protection during the period leading up to the
hearing on the claim, stating:
While the worker waits for the hearing on the
exemption, the unmodified wage garnishment stays in
effect often resulting in the worker being unable to
pay their bills. If the court later determines that
the exemption was valid and that wages were improperly
garnished, the judgment creditor must repay the
worker. But by then the damage has often been done and
even prompt repayment of the garnished funds won't
restore the worker's credit. AB 1321, however,
insures that workers that file a claim of exemption
are not penalized before they get their day in court.
In the meantime they can continue to meet their
household financial obligations. AB 1321 doesn't
discharge valid wage garnishments; it just insures
that in enforcing earnings withholding orders, that
workers don't have their lives destroyed in the
process.
ARGUMENTS IN OPPOSITION : The California Association of
Collectors (CAC) expresses a number of concerns about the bill,
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as articulately stated in its letter of opposition:
CAC believes that we are in a crisis in access to the
civil courts. This bill is not a reasonable solution
but will injure creditors and employers and cause
abuses in the system, along with many other unforeseen
and unintended consequences.
Current delays in the trial courts are a substantial
problem for all parties. CAC has raised concerns with
the Judicial Council regarding the current
difficulties in accessing the courts: delays and
difficulties in filings, hearings and judgment. The
Judicial Council has established working groups to
deal with this problem and that process is ongoing.
This bill seeks to tilt the process to benefit one
stakeholder at the expense of the rest. . . This bill
would suspend a legal wage garnishment already
executed while a claim of exemption is pending. It
creates an incentive to file these claims and will
create legal mills that routinely file them to gain a
suspension in execution of the garnishment, and there
is no mechanism to recoup the funds if the judge
ultimately denies the claim. (Finally) the bill
creates ambiguity and uncertainty for the employer.
CAC also opposes the bill for process reasons, pointing out that
until January 4, 2012, the bill concerned an entirely different
subject. CAC states:
There is no urgency to this measure. Doing a "gut and
amend" the first week back circumvents the opportunity
to provide reasonable notice as provided by the
"30-day in print rule". Allowing this bill to be
introduced and go through the normal legislative
process would provide stakeholders the time to review
and discuss with the author and sponsors the issues
raised.
PRIOR RELATED LEGISLATION : AB 1388 (Wieckowski), Chapter 694,
Stats. 2011, allows a 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.
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REGISTERED SUPPORT / OPPOSITION :
Support
Western Center on Law and Poverty
Opposition
California Association of Collectors
Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334