BILL ANALYSIS �
AB 1321
Page 1
Date of Hearing: January 19, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1321 (Wieckowski) - As Amended: January 12, 2012
Policy Committee: JudiciaryVote:7-3
Urgency: No State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill, effective July 1, 2013, allows a temporary stay on
judgment debtor's wage garnishment pending a court hearing to
decide the debtor's exemption claim. Specifically, this bill:
1)Requires a levying office, following a judgment debtor's
filing of a claim for exemption, to serve the debtor's
employer with specified documents.
2)Requires the employer, once served per (1), to immediately
reduce or cease the judgment debtor's garnishment (earnings
withholding order (EWO)) according to the amount claimed for
exemption by the judgment debtor.
3)Requires the levying officer, if a notice of opposition to the
exemption claim is not received within the time period
specified in current law, to serve on the employer a notice to
continue withholding as per (2).
4)Requires the clerk, if the court denies the judgment debtor's
exemption claim, to transmit to the levying officer a copy of
the court's order, and requires the levying officer to then
serve notice to the employer to withhold earnings per the
order.
5)Requires the Judicial Council to modify any forms, as
necessary to implement all of the above, by July 1, 2013.
FISCAL EFFECT
The annual number of EWOs statewide is unknown. Los Angeles
County (26% of the state's population) indicates that, of the
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51,654 EWOs served countywide in 2010-11, 2,843, or 6%, had
claims of exemption. (The number of exemption claims challenged
by creditors is unknown.) Extrapolating from LA County's
experience, the statewide annual total would be about 200,000
EWOs and about 11,000 exemption claims. Because the bill stays a
wage garnishment pending a hearing on a claim of exemption, this
would likely increase the number of claims and the number of
objections to such claims, thus resulting in more court
hearings.
1)Based on the Judicial Council's estimate of $2,400 in court
costs per hearing, for every 1,000 additional such hearings,
statewide costs would total $240,000.
2)In addition to the increased workload associated with
processing additional exemption claims, counties will incur
costs to notify employers to reduce or cease garnishments
pending the results of hearings on exemption claims. These
costs are unknown but probably would be at least in the low
hundreds of thousands of dollars statewide.
COMMENTS
1)Purpose . According to the author, current law allowing 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. This
is because the period from the judgment debtor's filing of a
claim of exemption until the court enters its judgment on that
claim can last many weeks or months. The author contends that
this length of time can be disastrous for families 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 their employer
reduced per the debtor's claim, but only until the time of the
court hearing to decide the merits of the claim of exemption.
This amounts to a 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. The author believes
this bill is necessary, particularly in light of the impact of
budget cuts on court operations.
2)Support . Western Center on Law and Poverty (WCLP) argues the
bill will help ensure that workers are not harmed by improper
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wage garnishments during the time the worker is waiting for a
court hearing on the claim of exemption. The WCLP reports that
the timing of court hearings following the filing of claims
for exemption often exceed the 30-days limit required under
current law. According to the WCLP, "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." The WCLP notes the particular burden
this presents for low-income workers, who can face the
inability to pay their bills.
3)Opposition . The California Association of Collectors (CAC)
argues the bill is an inappropriate means of addressing delays
in the courts system, will injure creditors and employers, and
cause abuses in the system. The CAC contends that, "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."
4)Prior Legislation . AB 1388 (Wieckowski)/ Chapter 694 of 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.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081