In California, if there’s a judgment against you the creditor will have several options to try to collect and can pursue one or more of these options simultaneously. The most common are a writ of attachment which allows the creditor to take money directly from a bank account and a wage garnishment which requires an employer to take money directly out of your paycheck. In this post, I will discuss a wage garnishment.

In California, the maximum amount that can be garnished (taken) from a judgment debtor’s wages depends on various factors, including the type of debt. California law provides specific limitations to protect you from excessive garnishment(s). Let’s explore the key aspects of wage garnishment in California.

1. Types of Debts:

   • Consumer Debts: This category includes debts arising from credit cards, personal loans, medical bills, and other similar obligations.
   • Child or Spousal Support: Debts related to court-ordered child or spousal support are given higher priority and can result in higher garnishment amounts.
   • Taxes and Student Loans: Government debts, such as unpaid state of federal taxes can also be subject to wage garnishment. In fact, the State of California aggressively pursues wage garnishment to collect unpaid taxes.

2. Maximum Garnishment Amount:

   • Federal Law Limit: The Consumer Credit Protection Act (CCPA), a federal law, sets limits on the amount of earnings that can be garnished. As of my knowledge cutoff in September 2021, the maximum amount is generally 25% of disposable earnings or the amount by which disposable earnings exceed 30 times the federal minimum wage, whichever is lower.
   • California State Law: While federal law sets a baseline, California law provides additional protection for debtors. In California, the maximum amount that can be garnished for most consumer debts is 25% of disposable income, but various exemptions and calculations come into play.

3. Calculation of Disposable Income:

   • Definition: Disposable income refers to the amount left after legally required deductions, such as taxes and Social Security, have been subtracted from an individual’s earnings. Note: this does not consider typical living expenses such as rent, food or transportation expenses.
   • Calculation: The garnishment amount is based on disposable income, which is determined by subtracting statutorily required deductions from the individual’s gross income. California law provides guidelines on how to calculate disposable income based on various factors.

4. Exemptions and Protections:

   • Claim of Exemption: this is a written form that’s provided with the wage garnishment papers. If you complete this form a judge will review your case to determine if the contemplated garnishment should be limited to less than the amount discussed above or denied completely based on financial hardship.
   • Low-Income Exemption: If your income is below a certain threshold your employer will be required to not garnish.
   • Exemptions and protections delay payment based on your financial circumstances but the judgment will continue to accrue interest until paid if full.

5. Prioritization of Debts:

   • California law assigns priority to certain types of debts. For example, child support and spousal support obligations typically take precedence over consumer debts.
   • Multiple Garnishments: If a debtor has multiple garnishments, California law outlines the order in which they should be satisfied, ensuring that obligations such as child support receive priority.

It is important to note that specific circumstances can vary. One interesting source of review is the guidance provided to employers by the State of California, see below.

At the Law Office of Michael Primus, we have helped hundreds of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy.  If you live in northern California and have debt problems, contact us for a free consultation.

Resources
www.selfhelp.courts.ca.gov/guide-earnings-withholding-orders-employers#First-step

Bankruptcy is designed to help you get through severe financial problems, and the law is designed to help you get back on your feet and move forward in life. It’s important to know that filing for bankruptcy doesn’t give your employer a valid reason to terminate your employment, reduce your salary, or change your job responsibilities. The bankruptcy laws specifically prohibit this type of discrimination, and this applies to all employees, regardless of whether they work for the federal government, state government, or a private company.

Usually, your employer will not even find out about your bankruptcy filing, because you are not required by federal law to disclose it. A bankruptcy will stop most garnishments (not child support garnishments) but your employer will almost certainly become aware of the bankruptcy as part of terminating the garnishment. Even if your employer does become aware of your filing, they are not allowed to discriminate against you. It’s worth noting that some employers may review credit reports during the hiring process. While a bankruptcy filing cannot be used to retaliate against job applicants, it may limit your ability to work in certain roles, such as payroll, accounting, or with business funds.

If your job requires a security clearance, your bankruptcy filing may actually be seen as a positive. Eliminating debts can reduce the risk of liability associated with your position and decrease the likelihood of blackmail. If you’re considering filing for bankruptcy, it’s a good idea to consult with a bankruptcy attorney to fully understand your rights and options.

Additionally, the law prohibits discrimination against you in the context of licensing which means, for example, you will not lose a contractor’s license, real estate broker’s license, or nursing license as a result of filing for bankruptcy.

At the Law Office of Michael Primus, we have helped hundreds of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy.  If you live in northern California and have debt problems, contact us for a free consultation.

The length of the lookback period varies depending on the type of transfer being examined. The preferential transfer period is 90 days prior to the bankruptcy filing date for ordinary creditors and one year prior for insiders, such as family members or business partners. The fraudulent transfer period, on the other hand, can extend back four years and possibly longer if the IRS has debts going back many years.

The lookback period refers to the period of time before the bankruptcy filing date that the court examines to determine whether any assets or transactions can be deemed fraudulent or preferential and is discussed in more detail herein.

The lookback period is divided into two types: the preferential transfer period and the fraudulent transfer period. The preferential transfer period is the period during which the person filing bankruptcy (commonly referred to as the debtor) has made payments to certain creditors that are considered “preferential” over other creditors. The fraudulent transfer period, on the other hand, is the period during which the debtor has transferred assets to another party with the intention of hiding those assets from creditors.

During the lookback period, the bankruptcy system can look at the debtor’s financial transactions to determine if any transfers or payments were made that could be considered fraudulent or preferential. In the case of preferential transfers, the court will look for transactions where the debtor made payments to certain creditors, such as friends or family members, while neglecting to make similar payments to other creditors. If the court determines that a preferential transfer was made, it may require the creditor who received the payment to return the funds for distribution among all creditors.

In the case of fraudulent transfers, the court will examine transactions in which the debtor transferred assets to another party with the intention of hiding those assets from creditors. This can include transferring assets to a family member or friend, selling assets for less than their value, or transferring assets to certain types of trusts. Note: most trusts are revocable living trusts, which do not cause problems. If the bankruptcy system determines that a fraudulent transfer was made, it may require the recipient of the assets to return them to the bankruptcy estate for distribution among all creditors.

It is important for debtors to be aware of the lookback period when considering bankruptcy. If a debtor has made any preferential or fraudulent transfers during the lookback period, those transactions will be reviewed by the bankruptcy system and may result in a lawsuit against the people involved. Scary! The time to discuss these issues is before filing for bankruptcy, and a lawyer can help avoid trouble in court. Some people assume they can avoid problems by “leaving that out” of the papers. The bankruptcy documents require disclosure of many transactions, and transfers involving real estate are easily seen in the county records, and transfers of vehicles are maintained by the Department of Motor Vehicles, so there are several reasons to carefully answer all questions in the bankruptcy forms.

In conclusion, the lookback period is a critical component of the bankruptcy process that ensures all creditors are treated fairly. By examining the debtor’s financial transactions during the lookback period, the court can identify any preferential or fraudulent transfers and ensure that all creditors receive a fair share of the debtor’s assets. Ultimately, the goal of the bankruptcy process is to provide a fresh start for the debtor while also ensuring that creditors are treated fairly.

At the Law Office of Michael Primus, we have helped hundreds of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy.  If you live in northern California and have debt problems, contact us for a free consultation.  Offices in Walnut Creek, Antioch and Hercules.

Sources
11 U.S.C. 547

11 U.S.C. 548