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California Collection Laws

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  • 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 Served Summons and Complaint 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 Code of Civil Procedure 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.

Know Your Rights - Wage Garnishment
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 (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.

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 § 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 § 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 § 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 § 697.010-697.060. Exemptions are covered under § 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 § 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 § 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). See the Bills.com article California Statute of Limitations to learn more details.

Know Your Rights - Collection Agents
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 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 § 2920-2944.7. 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 California Payday Loans to learn how California Civil Code § 1789.30-1789.38, 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 (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.

If you cannot afford a lawyer, contact Law Help CA or another California pro bono program to find no- or low-cost legal service.

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  • 35x35
    Jerrad,
    Jun, 2020

    My previous employer went into default on the 7th of may for an administrative remedy. How do i collect ?

    • 35x35
      Daniel,
      Jun, 2020

      Jerrad, I am not a lawyer so any information I share is not to be considered legal advice.

      The type of business (corporation or sole propietorship), the assets it has, the facts around the administrative remedy, what other debts your forrmer employer has and how the line forms to make claims by the people, business entities or government agencies that are owed money are all issues that need exploring.

      I advise you to speak with an attorney if what you are owed is significant.

  • 35x35
    DANNY PIKER,
    Mar, 2020

    Hi. I have a credit card bill I can't pay. I havent paid any of a $7,000 dollar credit card bill and wont be able to. How do i file bankrucpcy? I can't afford a lawyer.

    • 35x35
      Daniel,
      Apr, 2020

      Danny, sorry to read that you're under this kind of stress. 

      I recommend that you visit the official government website of the California Courts. Here is a link to their page about bankruptcy. It has good information about filing on your own.

  • 35x35
    Patricia,
    Jan, 2020

    I had a small business last year which closed due to health reasons. In 2017 we did online web marketing with a company not in California. They need a poor job and we terminated business with them at end of 2017. The continued to bill us in to 2018 and we finally got most bank charges reversed. Now I’m getting a bill from a debt collector out of Louisiana threatening to garnish bank bank account and liens on personal property. Their seeking $1500 plus court cost and 10% attorney fees. We don’t owe the money. This is our first notice. Notice is threatening. Should I be concerned,

    • 35x35
      Daniel,
      Jan, 2020

      Any time a threatening letter is received it is reasonable to be concerned. There is something fishy in what you described however. If you haven't been sued then there should be no threat of charging you court costs. If you were sued, it is different.

      Immediately send a debt validation letter to the LA collection agent.

  • 35x35
    Bonnie morrison,
    Nov, 2019

    Last time I went to my cleaners was in 2013, paid my bill and left...Now in 2018, a collection agency put a $2500.00 against my Credit score, never knew anything and no court action, no bills sent to me... If I had an amount due I never got a bill in the mail and I think this is for interest payments now.. Never had any bill for dry cleaning that high..Usually, $20.00 to $40.00. My last time there according to my statements was in 2013, Is this legal? They did this in 2018, I got zero in the mail and I found out checking my Credit score. I live in Calif.

    • 35x35
      Daniel,
      Nov, 2019

      I can't give legal advice, as only an attorney can properly do so. Here are a couple of thoughts, with the understanding that I am not giving you legal advice.

      The presence of a debt on a credit report is not proof you owe a debt. If you feel it is inaccurate, file a dispute with any credit bureau that is showing the debt. 

      If you are at the same address and phone number that the cleaners had in their records, the whole thing could be a mistake. Wouldn't they have called you about a debt?

      If you are sued, be sure to answer the summons or complaint. Go to court. From what you presented, the statute of limitations on debt should be a successful defense, if they didn't sue you before it ran out a couple of  years ago.

  • 35x35
    ,
    Oct, 2019

    I have heard the debt collectors will go through the IRS to collect on debts owed, is that true?

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