When it comes to protecting working families from debt collectors, California gets only a C, according to a study of state exemption laws conducted by NCLC.
No state got an A in the study: Alabama, Delaware, Kentucky 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 took a hit on its protection of a judgment debtor’s wages, drawing a D.
State law protects from garnishment 40 times the state’s minimum wage of $8/hour per week. So, a worker whose weekly take home pay is no more than $320 per week is fully protected.
If you take home over the weekly minimum wage, a judgment creditor can divert the lesser of everything over the minimum wage or 25% of your net wages
For most families, such a loss of income will seriously jeopardize their ability to meet their other obligations.
Wheels at risk
California drew another 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, household goods, and funds on deposit. But overall, we’re just in the middle of the pack in terms of debtor protections.
Self enforcing exemptions lauded
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.