California Collection Laws

What are California's laws regarding wage garnishment, levy, lien, foreclosure, and payday loans?

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Bill's Answer: Answered by Mark Cappel

A collection agent or law firm that owns a collection account is a creditor. A creditor has several legal means of collecting a debt. But before the creditor can start, the creditor must go to court to receive a judgment. See the Bills.com resource Served Summons and Complaint to learn more about this process.

The court may decide to grant a judgment to the creditor. A judgment is a declaration by a court that the creditor has the legal right to demand a wage garnishment, a levy on the debtor’s bank accounts, and a lien on the debtor’s property. A creditor that is granted a judgment is called a “judgment-creditor.” Which of these tools the creditor will use depends on the circumstances. We discuss each of these remedies below.

In California, the following cited laws are found under the Code of Civil Procedure unless specified.

California Wage Garnishment Law

The most common method used by judgment-creditors to enforce judgments is wage garnishment. A judgment-creditor contacts your employer and requires the employer to deduct a certain portion of your wages each pay period and send the money to the creditor.

Wise Advice In most states, creditors may garnish between 10% and 25% of your wages, with the percentage allowed determined by state law. Garnishment of Social Security benefits or pensions for consumer debt is not allowed under federal law, but may be allowed for child support. See the Bills.com Wage Garnishment article to learn more.

California allows wage garnishment (CCP § 706.010-706.011). In general, California follows the federal rules for the amount of a garnishment, which allows up to 25% of a worker’s wages to be garnished. For exemptions, CCP § 706.05 and § 703.010-703.150 define earnings and what is considered exempt. Municipal and state employees may be garnished. See the Bills.com resource California Wage Garnishment additional discussion on wage garnishment.

See the Dept. of Labor’s Employment Law Guide - Wage Garnishment and the Dept. of the Treasury's Answers About Garnishments.

Generally, 401(K) or other retirement funds are exempt from garnishment. It is advisable to have those funds deposited into a separate bank account if you are concerned about garnishment on those benefits.

Levy Financial Accounts

A levy means that the creditor has the right to take whatever money in a debtor’s account and apply the funds to the balance of the judgment. Again, the procedure for levying bank accounts, as well as what amount, if any, a debtor can claim as exempt from the levy, is governed by state law. Many states exempt certain amounts and certain types of funds from bank levies, so a debtor should review his or her state's laws to find if a bank account can be levied. In some states levy is called attachment or account garnishment. The names may vary but the concept is the same.

In California, a levy or attachment, is allowed under Section 699.510-699.560. Levy is allowed if the plaintiff possesses a legal instrument known a writ commanding the levying officer to seize and sell as much of a debtor’s property as is necessary to satisfy a creditor’s claim. See Section 700.010-700.200 for specifics.

If you reside in another state, see the Bills.com Account Levy resource to learn more about the general rules for this remedy.

California Lien

A lien is an encumbrance — a claim — on a property. For example, if the debtor owns a home, a creditor with a judgment has the right to place a lien on the home, meaning that if the debtor sells or refinance the home, the debtor will be required to pay the judgment out of the proceeds of the sale or refinance. If the amount of the judgment is more than the amount of equity in your home, then the lien may prevent the debtor from selling or refinancing until the debtor can pay the judgment.

California allows a lien for a money judgment. Under Section 697.510-697.670, mechanics and contractors (and similar laborers and professionals) have the right to place a lien on real property (697.310 through 697.410) or personal property (697.510 through 697.670). This also includes creditors for unsecured debt (credit cards, auto loans, et cetera), see Civil Procedure Code Section 697.010-697.060. Exemptions are covered under Section 704.010-704.210. A lienholder on a residence may not foreclose. However, if a lienholder of personal property may demand the sheriff seize the property and auction it to satisfy the lien.

If you reside in another state, see the Bills.com Liens & How to Resolve Them article to learn more.

California Writ of Replevin

Replevin means an action for recovering goods wrongfully taken or detained. Four California statutes cover replevin. One concerns the recovery of public records from a private party. A second concerns recovery of property before the commencement of civil litigation (Civil Procedure Section 512.010). A third concerns a post-judgment writ of possession (Section 712.010), and the fourth concerns the repossession of a manufactured home, a mobile home or real property (Sections 1166a, and 712.010 et. seq.). The fourth is usually applied when a landlord seeks to eject a tenant from a property.

California Statutes of Limitations

Each state has is own statute of limitations. Under California law, the statute of limitations is governed by Section 335-349.4. The statute of limitations on an open account (i.e., credit card) is 4 years, written contracts 4 years, real property actions 5 years, foreign judgments are valid for 10 years, and domestic judgments are valid for 10 years (and can be renewed at 10 years).

Wise Advice Collection agents violate the FDCPA if they file a debt collection lawsuit against a consumer after the statute of limitation expired (Kimber v. Federal Financial Corp. 668 F.Supp. 1480 (1987) and Basile v. Blatt, Hasenmiller, Liebsker & Moore LLC, 632 F. Supp. 2d 842, 845 (2009)). Unscrupulous collection agents sue in hopes the consumer will not know this rule.

California Foreclosure

For information on California foreclosures, see Bills.com article Is My HELOC a Recourse or Non-Recourse Loan in California? for a discussion of the differences between recourse and non-recourse loans. See also Mortgage Debt and Community Property to learn how California’s community property laws affect foreclosure.

California foreclosure laws are found in Civil Code Section 2920-2944.7. To learn more about the rules surrounding foreclosure in this state, including deficiency balances see CP Section 580d and Section 2938(e)(3).

California Payday Loan Collection

See the Bills.com resource Payday Loans to learn how California Civil Code Section 1789.30-1789.38, and specifically Section 1789.33, protects consumers of payday loans. Defaulting on a payday loan is not a crime in California, and collection agents suggesting the contrary are misinformed.

California Repossession Rules

The repossession agency must notify the borrower by mail or in person within 48 hours after repossessing a vehicle.

The seller or holder must give 15 days’ notice of intent to sell a repossessed vehicle to all persons liable on the contract (CC §2983.2(a)), except when the vehicle was seized by a public agency, such as a car seized by the police for transporting illegal drugs (CC §2983.3(b)(6)).

The notice of intent to dispose of a repossessed vehicle must advise all persons liable on the contract of their rights to redeem the vehicle, reinstate the contract, request a 10-day extension of the redemption and reinstatement periods, and request a written accounting of the disposition, and must give notice of the borrower’s possible liability for a deficiency judgment. (CC §2983.2(a)(1)–(9)). The seller must provide a full accounting for the disposition of the vehicle to any person liable on the contract on written request or if there is a surplus. (CC §2983.2(b)–(c))

California Collection Agency Law

Collection agents need not be licensed in California. The California Fair Debt Collection Practices Act (CFDCPA) is sometimes referred to as the Rosenthal Fair Debt Collection Practices Act (RFDCPA). The CFDCPA mirrors the FDCPA in most respects, with two exceptions. The first is original creditors are covered by the CFDCPA. By contrast, the FDCPA covers all collection agents and, in some circumstances, original creditors.

The CFDCPA’s second difference concerns how collection agents must use the legal process. California collection agents must:

  • Serve you with notice of a lawsuit when it sues you. If it gets a default judgment because it failed to serve you with a lawsuit notice, it may not collect on that judgment.
  • Sue you in the county where you either:
    • Incurred the debt
    • Lived when you incurred the debt, or
    • Live now
  • Not send you a document that appears to have been issued, authorized, or approved by a government agency or attorney when it wasn’t.

Violation of the CFDCPA may be a criminal misdemeanor. If you have been victimized by a collection agency, file a report of the violation with your local city or county district attorney or prosecutor. Consult with a lawyer to discuss filing a civil lawsuit against the collection agent. Some lawyers take these cases on a contingency basis, which means no out-of-pocket costs to you. These laws are found in California Civil Code § 1788.

Recommendation

Consult with a California attorney experienced in civil litigation to get precise answers to your questions about liens, levies, and garnishment in California. See also the State of California Dept. of Consumer Affairs document Collecting or Satisfying the Judgment for more information about California’s collection laws.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

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Comments (78)


Samantha B.
Fresno, CA  |  March 06, 2014
Hi. I am divorced but my exhusband and I owned a house together. He lived in the house after the divorce and was supposed to make payments. Last year we sold the house but after the different liens against him were satisfied with the sale, I did not recieve the full 50% equity that I was entitled to by our Maritial judgement. The judge ruled that he owes me that remaining amount. The issue is that he is remarried, and has been for some time. This judgement came after his marriage. In fact our whole Maritial Settlement agreement was signed after his marriage because we bifurcated early so he could remarry. He and his wife just bought a new house but they only did it under her name so that he remained asset less. Wage garnishment is an impossibility because he owns his own business, an S Corp, and he pays all his bill from the corp so that it doesn't make a profit. I am in severe financial straights. Money that I owe to creditors was not put as a lien against the house so basically all his debts were paid with the sale and none of mine were. Am I able to place a lien on his house for the amount owed to me per the judgement, even if he is not on the title, just his wife is? (This has all occurred in CA.) Thanks for any help you can provide.
Bills.com
March 10, 2014
Consult with a lawyer who has civil litigation experience to learn your options. You hinted your ex-husband resides in California, which is a community property state. The fact the wife has the house in her name alone may be irrelevant to your collections process. Again, a lawyer will analyze your situation in detail and review your options.
Marranda S.
Windsor, CA  |  November 19, 2013
How does the SOL work for California? I am not sure I understand it right. If there is debt that is more than four years old they cant collect? What if it has been sold off and bought buy another company? Is it from the date they bought it or from the date it was opened?
Bills.com
November 20, 2013
The SOL in CA depends on the type of debt. It is not the case in CA that a collection cannot try to collect even after the SOL has passed. It is up to you to know when you can use the SOL as a defense against collection, should you be sued. The clock on the SOL starts running at the date of first default on the account, not from when a new collection agency buys the debt. Remember that making a payment on the debt can restart the clock on the SOL.
Heather D.
Sacramento, CA  |  October 29, 2013
I have a debt from an emergency room visit about two years ago. I applied for CMISP and was approved so I assumed it had been taken care of. About a year later I was contacted by a collection agency and I sent them the paperwork saying I was approved for CMISP. Now another year later they say they did not receive the paperwork and there is nothing they can do, just yesterday my husband received a letter from an attorney for a judgement for the debt. I was not married at the time of the debt and it had nothing to do with him. I live in California. Are they in violation of the Rosenthal Act? Can they hold my husband liable for my debt?
Bills.com
November 01, 2013
Three bits of background information before I answer your question:

First, the US Congress created the Fair Debt Collection Practices Act (FDCPA). California's legislature created the California Fair Debt Collection Practices Act (CFDCPA), which is sometimes called the Rosenthal Fair Debt Collection Practices Act (RFDCPA). The federal law sets the rules for collection agents, and in some cases original creditors. The California law covers collection agents, original creditors in almost all situations, and companies that make forms and tools for debt collection. The California law does not otherwise vary from the federal law.

Second, CMISP stands for Sacramento County's "County Medically Indigent Services." CMISP is intended to be a last resort health care program for low-income adults residing in Sacramento County.

Third, California is one of 10 community property states. In contrast to common law states, a married person in a community property state has liability for his or her spouse's debts. In California, this includes pre-marital debt. However, judgment-creditors do not have the right to pursue a spouse's earnings to collect a debt. (California Family Code § 910(a) and § 911). In other words, a judgment-creditor who has a judgment against you cannot garnish your spouse's wages.

My advice? Take two actions: First, talk to a lawyer who has experience in consumer law. Ask him or her to draft a letter to the hospital regarding the CMISP approval and later mysterious non-approval. Demand the hospital recall the collection account from the collection agent. Second, the next time the lawyer/collection agent calls, ask for his or her employer's name and address, and then validate the debt.
Eric B.
Placerville, CA  |  June 26, 2013
I had a car repossessed in 2004. The original creditor sent it to and attorney/collection agency and they obtained a judgement for $11,500. They then began garnishing my wages. However, in 2009 the monthly payments my employer was making were being returned and they received a letter stating that the debt was recalled by the original creditor and assigned to a different collection agency. I have heard nothing until today when I received a call from the attorney/collection agency who had obtained the original judgement. They stated that the account was retuned to them and that I now owed $16000.00 with fees and interest charges that have accrued since the garnishment was cancelled. Is there any SOL that applies here, should I ask for a DV? Do they have to obtain another judgement, if so can I contest it? Please help. Thank You
Bills.com
June 28, 2013
Consult with a lawyer in your state to learn if the staggering increase in the size of the judgment is permitted under your state's laws. I doubt it.

If you cannot afford a lawyer, call your county bar association and ask for the names of the organizations that provide no-cost legal services to people with low or no income in your area. Make an appointment with one of the organizations, and bring all of the documents and letters you have regarding the debt to your meeting. The lawyer you meet will advise you accordingly.
Cynthia S.
Los Angeles, CA  |  June 20, 2013
In 2008, I had a car accident with a teenager with no license. I met the parents but could not come to an agreement. In 2009, we went to court with the child and parent. Shortly after I received a letter from court that I had won the case and that they were due to pay me $6,900 and a judgment will place till paid in full. Well, I never got paid , I ended up fixing my car from my own pocket and lost work days as well. What can I do to collect this money?
Bills.com
June 20, 2013
Your question illustrates why automobile owners and drivers involved in an accident should collect all of the contact information they can from the other driver, and then give it to their insurance company to handle the legal claims and negotiations. You may have wished to handle this yourself either because you did not have insurance, or had no under-insured motorist coverage.

Or, perhaps the teenager's parents convinced you to not file a claim with your insurance. If this is the reason you did not file a claim, it is clear now the teenager's parents never intended to pay for their child's misadventure, and wanted to deal with you rather than your insurance company's lawyers.

For the benefit of other readers, always file a claim with your automobile insurance company when your vehicle is damaged or damages another vehicle, property, or a person. The person who says, "Let's not involve the insurance companies in this," has his or her interests at heart, and not necessarily yours.

On to your question: Consult with a lawyer in your state who has consumer law experience. You venture into an area of law called remedies, and you need a lawyer because the state laws here are precise and full of traps for the unwary. It is easy to wreck the judgment you worked so hard to obtain by taking a misstep in starting a wage garnishment, account levy, property lien, or personal property seizure. It is possible, of course, to get a wage garnishment, account levy, property lien, or personal property seizure without a lawyer's help, but I would not recommend doing so.
Christy F.
Campbell, CA  |  June 13, 2013
I live in CA and had a levy against my bank account. The amount in my account that was taken was not enough to satisfy the judgement. According to the bank, a new order has to be issued every time until they satisfy the levy - meaning they can't just keep taking money unless a new order is issued every time. Is this true?
Bills.com
June 17, 2013
The bank is correct. See the Judicial Council of California's Collect From the Debtor's Property page for a description of the levy and wage garnishment process, and your rights under California law to object to the levy.
Luis T.
Anaheim, CA  |  November 29, 2012
Im a bit confused as to how much can be garnished from California residents? I was employed with a company who did their own book keeping and was being garnished for child support $369.00 bi weekly and debt 0f $11,000.00 that was paid off in a little over a year. I was making $15.00 an hour with 40 hour weeks and my take home pay was $436.00 bi weekly?? I addressed the issue with supervisor/owner/book keeper and she stated that per California state law two places can garnish from my check at the same time up to 75%??? Is this information correct, please help thanks.
Bills.com
November 29, 2012
Your employer is wrong, wrong, wrong, unless the garnishments are related to delinquent child support payments or tax debt.

If your wage garnishments are related to child support, then up to 60% of your wages can be garnished. Child support-related wage garnishments have priority over other wage garnishments. In other words, they immediately go to the front of the line if there are other wage garnishments in effect.

Let us assume for the sake of argument the two wage garnishments were from judgment creditors, and were not related to child support or taxes. Under federal law (the Consumer Credit Protection Act Title 3) and California statute (CCP § 706 et seq.) only the amount greater than $217.50 per week may be garnished where the disposable earnings are $290 per week or less. You mentioned your take-home pay (which the law calls "disposable earnings") is $436 every two weeks. I will assume you work about the same number of hours per week. According to my math, your disposable earnings are $218 per week. This means $1 per pay period can be garnished from your pay check.

Acquaint your employer's payroll person with Wage Garnishment: A Guide to Understanding Court-Ordered Wage Garnishment and Your Options to understand California's rules, and the Dept. of Labor's The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title 3 (PDF) to learn the federal rules.
Jack W.
Brooklyn, NY  |  October 16, 2012
Is it safe for someone with severe debt to purchase property in their own name? I have some $50,000 in debt which has been delinquent over 4 years now. It's mostly from credit cards but there is some student loans, medical and misc. All of the debt was accrued in California, though I currently reside and work out of state. According to my credit report there was a judgment filed for $25k in Dec of 2008 by a credit card company and there are five different collection agencies listed who have made "Account Review Inquiries" as recently as yesterday. That said, I've never actually been bothered by creditors, possibly because I didn't fill out a W-2 for several years or because my mailing address and phone number was inconsistent. Now... I'd like to purchase a small piece of vacant land (not in California) and I'm concerned that if I put my name on the deed someone will come after it. The full market value of the property is listed at $6,700 but the selling price would be over $20,000. There would also be another name on the deed. Could a collection agency put a lien on the property if my name is on the deed? How would that work? Are they likely to do so for property valued at that amount? Thanks ahead of time for your help. The service you provide here is invaluable. Not only is the information clear and thorough, it is very comforting. Your tone isn't judgmental or condescending, which is a huge relief when dealing with an issue that often carries such shame. Thank you, Bill. z/s
Bills.com
October 16, 2012
I can't give you legal advice, as only an attorney can properly do so, but I will share a few thoughts.

A creditor with a judgment against you could obtain a lien that would encumber the property you buy. If they become aware of your ownership, through some public records search, for instance, it seems reasonable to expect a lien to be filed.
Alex M.
San Diego, CA  |  May 18, 2012
I recently found out that there was a lawsuit and lien judgement against me in Los Angeles for a credit debt. However, I was never served and did not go to court because I was unware of the suit. Additionally, this debt was about to exceed the california statute of limitations, so the attorney office representing the original credit company submitted the suit right before the SOL. I would like to buy a home now. Does this lien affect the purchase of a home in Los Angeles? Or would I only be affected if I tried to resell the home?
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Tiffany P.
Perris, CA  |  May 18, 2012
I only know this because I talked to about 5-10 different lenders and if you have a public record on your credit file you will not be able to get a loan for a home. My husband had a judgement against him and it was reported on only one of his credit reports and we weren't able to get financed (we live in So Cal) so luckily for us his fell off after the ten years and they didn't renew it. But the lenders we talked said we would have had to pay it and then go through the courts to get it show as paid. Hope this helps :)
Bills.com
May 22, 2012
The company was within its rights to file suit against you before the SOL expired. In fact, in most states a creditor can even sue you after the SOL has passed, though you can use the SOL as an affirmative defense. In your situation, the lawsuit being filed before the SOL expired negates you using the SOL to protect yourself.

This matter could be a big problem for purchasing a home, depending on when the judgment shows up on your credit report and how the debt is now reported. As things currently stand, you may have to pay off the collections account to qualify for a mortgage loan, depending on the size of the debt and its age. If it goes to the point where a judgment appears, it is almost certain that lenders would require you to satisfy the debt before they would approve your application. You also want to avoid a judgment, if possible, to avoid the harm it will cause to your credit score.
Kimberley H.
San Lorenzo, CA  |  January 29, 2012
We purchased our home in 1992 for $189450. Right now after 19 yrs its valued at $285000. At the time of the crash when people lost jobs and homes, my husband lost his job and I became disabled. Our payments then where $2080.00 Plus and equity line or $75000 at $400.00. Needless to say we could not pay either one. So for the next year and half we made no payments to either one. My husband found a job. We tried working out a mod with the second loan, they would not do it. BOA was willing to,so after 3 years we have a modified loan at $1437.00 a month. BoA took the 13 or 14 mo we didnt pay and added them to our loan, at a 40 yrs, at 3%. As for the Equity line,Citibank,by now it was with a collection compay, continually adding interest and late charges everymonth with the total now at $87000! They refuse to take anything less than $300 a month(we cant do it) My question is...are they allowed to keep adding interest and late charges once it goes to a collection agency? Is there a statue of limitations on collections of this loan? My fear is, I really dont know if we will ever be abel to pay it, I had to retire, his job is much less than the one that closed up. We barely make ends meet, how can we meet all of our obligations?
Bills.com
January 30, 2012
Most likely the loan was called in and late charges and rates were taken on the full balance of the loan. Regarding the legality of the charges on your home equity loan, you will need to refer to your loan agreement versus the statements sent to you. The collection agency will be able to charge interest rates, pursuant to your agreement, but not more than allowed by state law. The $300 charge most likely covers interest only. The creditor is not interested in a negative amortization. Since you already lowered your first mortgage to the lowest available limit, there is not much left to do in terms of lowering your mortgage payments. Since it sounds as if you have positive equity in the house, your best solution, may be to negotiate a lower pay off with the creditor, and sell the house.
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