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California Collection Laws

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Updated: Oct 23, 2014

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Highlights

  • California allows wage garnishment and bank account levies.
  • The California statute of limitations on credit card debt is four years.
  • Consult with an attorney to learn more about your rights and liabilities.

Learn California's Laws for Wage garnishment, Levy, Lien, Foreclosure, Payday Loans & More

If you owe debt and reside in California, it’s important to understand your rights and liabilities. It is even more important if a creditor threatens to file a lawsuit against you.

A lender, collection agent or law firm that owns a collection account is a creditor. California law gives creditors several means of collecting delinquent debt from you.

Before a creditor may use these legal tools in California, the creditor must go to court to receive a judgment against you. See the Bills.com article to learn more about this process, and how to fight a lawsuit.

A court will hold a hearing after a creditor files a lawsuit. A hearing may result in a judgment awarded to the creditor. A judgment is a court’s declaration the creditor has the legal right to demand:

The laws calls these remedies. A creditor granted a judgment is called a judgment-creditor. Which tool a judgment-creditor may use depends on the circumstances and California law. We discuss each of these remedies below. In California, the following cited laws are found under the unless specified.

California Wage Garnishment Rules

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.

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

California allows wage garnishment (). 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, define earnings and what is considered exempt. Municipal and state employees may be garnished. See the Bills.com resource additional discussion on wage garnishment.

See the Dept. of Labor’s and the Dept. of the Treasury’s .

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.

California Financial Account Levy

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 . 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 for specifics.

If you reside in another state, see the Bills.com 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 , 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 . Exemptions are covered under . 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 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 § 512.010). A third concerns a post-judgment writ of possession (§ 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 . 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). See the Bills.com article to learn more details.

Collection agents violate the 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 for a discussion of the differences between recourse and non-recourse loans. See also to learn how California’s community property laws affect foreclosure.

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

California Payday Loan Collection

See the Bills.com resource to learn how California , and specifically § 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 (), except when the vehicle was seized by a public agency, such as a car seized by the police for transporting illegal drugs ().

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. (). 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 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 for more information about California’s collection laws.

If you cannot afford a lawyer, contact or another to find no- or low-cost legal service.

78 Comments

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  • SB
    Mar, 2014
    Samantha
    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.
    0 Votes

    • BA
      Mar, 2014
      Bill
      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.
      0 Votes

  • MS
    Nov, 2013
    marranda
    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?
    0 Votes

    • BA
      Nov, 2013
      Bill
      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.
      3 Votes

  • HD
    Oct, 2013
    Heather
    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?
    0 Votes

    • BA
      Nov, 2013
      Bill
      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.
      0 Votes

  • EB
    Jun, 2013
    Eric
    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
    0 Votes

    • BA
      Jun, 2013
      Bill
      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.
      0 Votes

  • CS
    Jun, 2013
    cynthia
    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?
    0 Votes

    • BA
      Jun, 2013
      Bill
      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.
      1 Votes