BILL ANALYSIS �
AB 1388
Page 1
ASSEMBLY THIRD READING
AB 1388 (Wieckowski)
As Amended April 26, 2011
Majority vote
JUDICIARY 7-2
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|Ayes:|Feuer, Atkins, Dickinson, | | |
| |Huber, Huffman, Monning, | | |
| |Wieckowski | | |
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|-----+--------------------------+-----+--------------------------|
|Nays:|Wagner, Jones | | |
| | | | |
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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
provides that the term "common necessaries of life" does not include
hospital services or medical care, for the purpose of determining
whether a specified exception applies that would prevent the
judgment debtor from successfully claiming the statutory exemption
from levy of 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.
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
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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.)
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 seeks instead to make this exemption from wage garnishment
available to a judgment debtor 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 or her
current financial hardship requires a certain portion of his or her
wages to be exempted from wage garnishment for the support of the
debtor and his or her 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.
Under the Wage Garnishment Law, 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
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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 (both are Judicial
Council-approved forms) with the levying officer. On the claim of
exemption form, the debtor attests that he or she needs either all
or a specified portion of his or her earnings to support himself or
herself or his or her family. On the financial statement, the
debtor provides a detailed account of his income and expenses that
support his or her claim that the court should approve an exemption.
(Judicial Council Form WG-006.)
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."
According to the author, this bill is needed to address consequences
suffered by the working poor that stem from case law interpreting
CCP Section 706.051(c). That statute provides that an exemption
from wage garnishment for the support of a judgment debtor and his
or her family "is not available if...�t]he debt was incurred for the
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common necessaries of life (emphasis added) furnished to the
judgment debtor or the family of the judgment debtor."
According to the Judiciary 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 CCP Section 706.051(c)(1))
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 CCP 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.
As recently amended, this bill would preserve the existing exception
to the hardship exemption for "common necessaries of life," except
that it would exclude hospital services and medical care from
statutory construction of that term as a matter of law. 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.
Recent scientific research indicates an increasing percentage of
bankruptcy filings are associated with illness and medical bills.
In a 2009 study published in the American Journal of Medicine,
Harvard researchers surveyed a random national sample of 2,314
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bankruptcy filers in 2007, abstracted their court records, and
interviewed 1,032 of them. 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
$5,000, or 10% of pretax family income.
Supporters of the bill, including several legal service providers
for low-income clients, cite this Harvard study in support of the
need for this bill, and further contend that the exemption should be
available in cases of medical debt because, among other reasons,
medical debt is often involuntary or may be caused in large part by
the improper actions of others.
The California Association of Collectors opposes this bill,
contending that it shifts priorities from ensuring that those who
take goods or services are responsible for paying back those who
extended the services or provided the goods, and instead would allow
people to avoid accountability for those purchases. However, as
previously noted, this bill does not seek to discharge the
underlying judgment debt. Judgment debtors ultimately would still
be responsible for paying for what they have purchased, as is true
under existing law. The exemption at issue here acts only to
protect from garnishment that portion of the judgment debtor's
earnings that are necessary to support the debtor and his or her
family for the statutory lien period created by the EWO, not to
excuse the debt itself.
Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334
FN: 0000318