A collection agent is threatening to sue me. My questions is, what can they do? Garnish my wages? Seize my car? Take my 401(k)? I live in California.
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.
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.
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.
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.
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.
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.
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.
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).
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).
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.
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))
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:
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.
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.
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