Can a collection agency garnish your wages in California?
Both state and federal law in California has shielded a part of a consumer's earnings from collectors. While a judgment creditor may ask the court to grant a wage garnishment order, the amount cannot exceed 25% of the debtor's total monthly income.
The degree of protection is even higher for many individuals. This is so that the creditor can only take 25% or 50% of the debtor's disposable income, which is greater than 40 times the applicable minimum wage.
While a considerable portion of wages was under wage garnishment exemption, once it was placed into the consumer's bank account, it was no longer protected. According to a California law, all of that has changed as of September 1, 2020.
For further discussion about wage garnishment in California, let’s look into the basics first.
California Wage garnishment as per federal law
In California, in addition to regular creditors, wage garnishments for past-due consumer debt, such as credit card debt, back rent, medical debt, vehicle loans, personal loans, or utility expenses, are permitted by debt collection agencies, debt collectors, and debt buyers.
Debt collectors are only permitted to garnish your wages, bank account, or benefits if you have already been sued and a court has rendered a judgment against you for the money owed. Federal and state laws restrict the amount collectors can take from your disposable earnings and bank accounts.
Many individuals wonder, Can payday loans garnish wages? Yes, they can. But the creditor must be a legal payday loan lender. To collect consumer debt, collectors typically need a court order judgment.
Your disposable earnings may also be garnished for unpaid taxes, unpaid alimony, unpaid child support, and unpaid public student loan debt. Student loan debt, local taxes, and other similar debts are unique, and they do not need a court judgment.
Can a creditor garnish your wages after 7 years?
The consumer debt statute of limitations in California is for four years. This makes the debt uncollectible after four years because a creditor cannot succeed in court after that point.
However, if a debt collector has filed a lawsuit against you and won, they may be able to garnish your disposable earnings until the amount is settled. That could be seven days, seven years, or even more.
How does wage garnishment work?
As a debt collection strategy, garnishment of wages enables judgment creditors to deduct money from their paychecks to settle past-due debts. For the majority of consumer wage garnishments, a court order is necessary.
Both federal law and state laws regulate wage garnishment in California. Wage garnishment is moderated by the federal Consumer Credit Protection Act (CCPA), and in California, it is governed by Chapter 5 of the California Rules of Civil Procedure. State law in California offers more excellent protection than federal law.
When Can Creditors Garnish Wages?
After several debt collection efforts, the creditor can sue a person who has exceeded the pay period and failed to pay off debt. These debts are primarily unsecured debts such as credit card debt, medical bills, payday loan debts, utility bills, loans, etc.
For the creditor to be able to garnish the debtor's earnings, the creditor has to file a debt collection lawsuit, and the court must give a judgment in the creditor's favor.
Although there are a few exceptions, this is often the only way a creditor can legitimately garnish a debtor's earnings.
Minimum hourly wages in California
The state minimum wage in California is $15 an hour for employers with more than 25 employees and $14.00 per hour for employers with less than 25 employees. As on January 1, 2023, the statewide minimum wage, regardless of the size of the company, will be $15.50 an hour.
Federal law states that the minimum wage for covered nonexempt employees is $7.25 per hour.
Limits on California wage garnishment
Under California law, the maximum amount of wages garnished can be:
- 25% of your disposable income for that week or
- 50% of the amount by which your weekly disposable incomes exceed 40 times the state hourly minimum wage.
Suppose a judgment debtor is employed in a state where the hourly local minimum wage is higher than the state minimum hourly wage. In that case, the local minimum hourly wage (effective at the time of income payable) is considered for the calculation. (Cal. Civ. Proc. Code § 706.050).
The debtor may be eligible for a bigger exemption claim if he/she can show proof of requirement. Under California law, "the portion of the judgment debtor's earnings which the judgment debtor proves is necessary for the support of the debtor or the debtor's family supported in whole or in part by the debtor is exempt from levy under this chapter." (Cal. Civ. Proc. Code § 706.051).
California wage garnishment Limits for Unpaid Child Support
Since 1988, an automatic earnings withholding order has been a part of all court orders for child support. The other parent may also request that the court issue an order to pay garnishment if he/she falls behind on the child support payments.
This kind of wage garnishment has a limit in federal laws. If a parent is currently providing for a spouse or child who isn't the subject of the order, up to 50% of the disposable income might be taken to pay child support, as per wage garnishment laws maintained by federal and local governments.
Up to 60% of the disposable income may be seized if the parent isn't providing for the other spouse or kids. As per the wage garnishment laws, if a parent is more than 12 weeks behind on the payments, an extra 5% may be charged (15 U.S.C. § 1673).
California wage garnishment Limit for Federal Student Loans in Default
The U.S. Department of Education or any organization collecting for this agency may deduct up to 15% of your pay if you are in default on federal student loans (20 U.S.C. § 1095a(a)(1)). "Administrative garnishment" is the term used to describe this type of garnishment.
However, you are allowed to keep money that is equal to 30 times the weekly federal minimum wage in effect. The amount of income 30 times the minimum weekly salary is shielded from garnishment by federal law (15 U.S.C. § 1673).
California wage garnishment Limits for Unpaid Taxes
If, as a taxpayer, you owe unpaid taxes, the federal government can deduct that money from you as an employee's wages (a process known as a "levy") without a court judgment.
The taxpayer's standard deduction and all personal exemption deductions are added to determine the weekly exempt amount. The taxpayer must be granted these deductions during the tax year in which the levy occurred. After that, divide the total by the number of weeks (52).
The IRS considered the amount exempt from levy on the standard deduction for a married person filing separately, with just one personal exemption; if he/she fails to verify the standard deduction and the number of dependents permitted to claim on the tax debt return (26 U.S.C. 6334(d)).
If you owe California state and federal taxes, state and municipal governments may also garnish your weekly disposable earnings for recovery. California may withhold up to 25% of an employee's disposable earnings if he/she owes back taxes on that state. So, keep an eye on your tax debt issues if you owe money, communicate with the appropriate government agency, clean up back taxes, and get debt relief.
Multiple Court Judgements
An employee may be subject to multiple wage garnishment orders for various debts such as personal loans, medical bills, credit card bills, etc. If this occurs, the total amount that can be taken for the wage garnishment order, apart from child support, cannot be more than 25% of the overall disposable income.
Any child support garnishments must be served first if there are other garnishments against that person. The balance can only be paid if there is sufficient cash on hand.
California Wage Garnishment order and Process
In California, there are several steps in the wage garnishment process.
1. The creditor sues the borrower to win a judgment
A judgment is required for garnishing wages. So, the creditor needs to file a lawsuit to get a judgment. If the creditor prevails, the court will issue a judgment specifying how much the borrower owes. This will cover the debts, associated expenses, charges, and interest. Wage garnishment requires a different procedure after the judgment is granted.
The creditor is referred to as the judgment creditor or plaintiff during the wage garnishment process, while the debtor is referred to as the judgment debtor or defendant. The employer garnishes the wages from the borrower. The levying officer is the sheriff or another similarly designated agent. The creditor and the levying officer take the steps coming next.
2. Your employer receives documents from the creditor
The creditor will apply to the court for a writ of execution. This effectively serves as a documented directive to your employer to withhold earnings from your paycheck to comply with the judgment. The levying officer will serve your employer with the writ, which is effective for 180 days.
The court will attach an earnings withholding court order, financial statement and claim of exemption form, employee instructions, and other documentation to the writ. These papers may be referred to as the garnishment packet, and the employer has 15 days to return a response form to the court. If he/she didn't respond within 15 days, he/she would be responsible for the employee's debt.
3. The wage garnishment procedure starts
The garnishment papers must be served to you by your employer within ten days. Your first paycheck will be garnished ten days after serving the employer. The writ may occasionally be served along with a memorandum of costs following judgment. In this document, additional expenses related to the collecting process are listed. The borrower has ten days to contest the other extra expenses.
4. The borrower may object and respond with exceptions
If the borrower objects and requests exemptions as the judgment debtor within ten days of being served, the wage garnishment won't start. After the garnishment has begun, the borrower can still request an exception, but it will take longer to process. He/she can get assistance from a consumer law attorney during the procedure.
He/she can object as being exempt, not owing the amount, not being adequately served, or he/she received a discharge in debts from bankruptcy. If you require money to support others or for basic living necessities, you can also object and request an exemption in California.
The borrower must carefully read the employee guidelines in the garnishment packet to request exemptions and objects. The financial statement and claim of exemption form must be filled out and submitted to the sheriff's office. Save the original and make a copy for filing. The borrower may contact the sheriff's office or court clerk to learn more about the case. Usually, they are unable to provide legal help.
5. The objections and exemptions will be reviewed in court
Any objections and exemptions from you as the borrower will be served in court. The creditor will have ten days to raise any issues with them. Following this hearing, the court will decide whether to garnish your wages in full for the creditor's proposed amount, in part based on your exemptions and hardship, or not at all.
If, as a debtor, you fail to attend the hearing in court, the creditor will be able to garnish your wages as a result of a default judgment, and you will have to take further actions to pause or stop wage garnishment.
6. The garnishment stops or goes on
If the judge rules in the borrower's favor, the garnishment will end, and you'll get your money back. The garnishment will continue if the court rules in the creditor's favor.
You may consult a bankruptcy lawyer or an attorney to know these processes in detail.
How To Stop a wage garnishment in California
There are a few ways to stop wage garnishment in California:
- A debtor has two options initially. He/she can get debt relief by paying off debt in full or letting the garnishment take place until the debt owed is paid off.
- Even though the wage is garnished, the debtor may try to negotiate with the creditor about existing debt payments. He/she may be able to prevent garnishment if the creditor is willing to establish a repayment plan.
- In California, a debtor might be eligible to file an exemption and pause the wage garnishment. If he/she can prove that the money is required to sustain his/her family or meet essential needs, the court may stop or reduce the process.
- A borrower may take additional steps to stop a wage garnishment, such as contesting the judgment acquired by default due to a lack of notice. The debtor can show that serving the summons did not result in the actual notice in time to fight the lawsuit. If a person can show that the default entry was due to "error, inadvertence, surprise or excusable carelessness," he/she may also be able to vacate a judgment.
- The wage garnishment can be stopped by declaring bankruptcy in California. Although most people view this as a last alternative, it is the preferable choice for many. When a person files for bankruptcy, the automatic stay makes creditors stop wage garnishment. California's bankruptcy exemption provisions will assist a debtor in preserving some of the assets. Most debts will be entirely discharged after the bankruptcy. As a result, wage garnishment will end forever. Collectors won't be able to pursue the debtor as there is no debt. So, search for a bankruptcy attorney if you are facing wage garnishment and want to file for bankruptcy.
Resources for People Facing Wage Garnishments
California offers several resources to assist you with the garnishment procedure.
Listed below are a few entities to get you started by following the state and federal law:
- Los Angeles Legal Aid Foundation – Self-help information and services for Californians coping with this issue.
- Free California Law Help – The Legal Aid Association of California offers resources, guidance, and contact details.
- San Joaquin County Self-Help Legal Clinic – Stockton and the surrounding community can receive assistance.
- California Courts - Forms, guidelines, and information provided by the California Judicial Branch.
- Department of Consumer Affairs(DCA) – More details on California's garnishment laws.
- U.S. Department of Labor
- California Labor & Workforce Development Agency
- State of California Department of Industrial Relations
