Major changes to Judgment Enforcement laws taking effect soon
By David Wall, Chief Legal Officer
& Ali Ammar, Chief Investigations Officer
California is set to make significant changes to the enforcement of judgments starting in 2023. Following months of deliberation by the State Legislature, Senate Bills 1200 and 1477 are now awaiting Governor Gavin Newsom’s signature.
Senate Bill 1099 was signed by the Governor on September 28, 2022. The Governor is expected to sign the remaining bills before the September 30th deadline. Once signed, the bills will take effect on January 1, 2023.
Generally, the proposed bills affect three key areas of judgment enforcement: (1) judgment renewals and interest; (2) wage garnishments; and (3) minimum exemption amounts for vehicles. A brief overview of the current law is provided below, followed by a comparison to each Senate Bill.
Senate Bill 1200: Renewal and Interest
Current Law: A judgment creditor has 10 years in which to enforce a money judgment. However, this period of enforceability may be extended by filing an application for renewal of the judgment. The filing of the application renews the judgment and extends the period of enforceability for a period of 10 years.
While a money judgment is outstanding, interest accrues at the rate of 10 percent per annum on the principal amount outstanding, in addition to any fees and penalties charged by the original creditor.
Senate Bill 1200: This bill restricts the renewal of certain money judgments and reduces the interest rate applied to certain outstanding money judgments. Importantly, the bill provides that the following types of money judgments may only be renewed once for a period of five years.
- A judgment on a claim related to medical expenses if the principal amount of the money judgment remaining unsatisfied against a debtor is under $200,000.
- A judgment on a claim related to personal debt if the principal amount of the money judgment remaining unsatisfied against a debtor is under $50,000.
Additionally, Senate Bill 1200 changes the interest rate that accrues on the principal amount of these money judgments from 10% to 5%, where the judgment is entered or renewed on or after January 1, 2023. Moreover, these judgments, if renewed before January 1, 2023, are no longer eligible for renewal (but remain valid for 10 years from when last renewed).
Senate Bill 1099: Bankruptcy – Signed into law 09/28/2022
Although titled “Bankruptcy,” this bill contains important provisions related to the exemption amounts associated with a motor vehicle levy, among other exemptions. The bill also modifies exemptions, which include categories of property and the conditions and amount which a debtor may claim as exempt from enforcement with or without filing bankruptcy. For brevity, the exemptions are not listed here but may be found within CCP 704.010-704.210 and CCP 703.140(b).
Current Law: When a vehicle is seized pursuant to a levy, a certain amount of equity in the automobile is shielded from creditors – currently, under California law, $6,375 under the bankruptcy exemption and $3,625 under the judgment levy exemption. If the car is determined to be worth more than the exemption, then the debtor’s vehicle must be sold. The debtor can retain the exempt amount but must surrender the excess to creditors.
Senate Bill 1099: This bill increases the motor vehicle exemption from $3,325 to $7,500.
Less common new exemptions:
- Provides that payments for alimony, maintenance, and support of the debtor are exempt, to the extent reasonable and necessary for support.
- Up to $7,500 in accrued vacation credits or accrued, unused vacation pay, sick leave, family leave, or wages are exempt.
- Treats motor vehicles that have been altered to accommodate a disability as exempt.
Senate Bill 1477: Wage Garnishments
Current Law: Under current law, the amount that is subject to garnishment is the lesser of: (1) 25% of the worker’s disposable earnings; or (2) 50% of the amount by which the worker’s disposable earnings exceed 40 times the minimum wage.
Senate Bill 1477: This bill reduces the allowable wage garnishment to 0% for $24.38/hr or less wage earners, and in $17/hr. minimum wage localities, $27.63/hr. wage earners would be completely exempt. Proponents of the bill produced the examples below, which provide an illustration of the effects of Senate Bill 1477.
Example 1: A low-income debtor earning $31,200/year. In other words, a full-time worker earning $15/hour, the current state minimum wage required to be paid by large employers.
- Earnings: $600.00/week
- Post-garnishment earnings (current): $480.00/week ($0 garnished)
- Post-garnishment earnings (SB 1477): $480.00/week ($0 garnished)
Example 2: A middle-income debtor supporting two children, earning $82,000/year.
- Earnings: $1576.92/week
- Post-garnishment earnings (current): $930.77/week ($330.77 garnished)
- Post-garnishment earnings (SB 1477): $1189.90/week ($71.64 garnished)
Example 3: A high-income debtor earning $127,500/year.
- Earnings: $2416.35/week
- Post-garnishment earnings (current): $1280.77/week ($680.77 garnished)
- Post-garnishment earnings (SB 1477): $1714.90/week ($246.64 garnished)
The enactment of Senate Bills 1200, 1299, and 1477 will present new challenges to judgment creditors. Those attempting to enforce judgments related to medical expenses or consumer debt must be especially vigilant to the changes concerning renewals and interest in Senate Bill 1200. Importantly, creditors must act quickly to renew and enforce their judgment. Further delay may prevent the enforcement of the judgment forever.
Creditors must also be cognizant of the frequent changes in exemption amounts. Concerning Senate Bill 1299, judgment debtors may now shield a greater amount of equity resulting from a motor vehicle levy. While unfortunate, this provision does not preclude the seizure of a vehicle entirely. In fact, a vehicle levy is often very effective and overlooked in the context of enforcing judgments.
Lastly, the impact of Senate Bill 1477 cannot be overstated. The bill will dramatically affect the ability to garnish wages, exempting many potential garnishees entirely. These exemptions are not need-based and would apply to all debtors based on individual pay. Creditors will likely need to pursue alternative enforcement methods for a large majority of judgment debtors.
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