When it comes to protecting working families from debt collectors, California gets a B, according to a study of state exemption laws conducted by NCLC.
That’s up from the C it got in the last survey.
No state got an A in the study: Utah, Alabama, New Jersey, Tennessee and Michigan rated F’s.
State exemption laws control what assets and income a creditor with a judgment can seize to pay its judgment. Without adequate protections for earnings, household goods, and a car to get to work, a family can be pushed into poverty or joblessness.
California wage garnishment
The Golden State improved on its protection of a judgment debtor’s wages, drawing a B. That’s up from a D last time.
State law protects from garnishment 40 times the state’s minimum wage of $13/hour per week .
If you take home over the weekly minimum wage, a judgment creditor can levy 50% of the disposable wages over the minimum wage or 25% of disposable wages, whichever is less.
For most families, such a loss of income will seriously jeopardize their ability to meet their other obligations.
Wheels at risk
California drew a D on its protection of the family car. At a time when the average used compact car sells at wholesale for a hair over $7000, California’s exemption is well below that.
The irony is that the exemption applies to the equity, over and above any loans secured by the vehicle. A judgment debtor driving a BMW with a big loan may be more secure in his ability to get to work than the restaurant worker driving a paid-for clunker.
We scored better on protection of the family home in light of the increased homestead exemption, household goods, and funds on deposit.
Self enforcing exemptions lauded
NCLC included in its report a model family protection act that attempts to make exemptions, as far as possible self enforcing.
The goal was to minimize the paperwork and court appearances often required under state law to protect wages or funds necessary for the support of the debtor and his family.
The procedure in California for asserting exemptions outside of bankruptcy is found at CCP 703.520.
Image courtesy of Flickr and marsmet491.