1. It’s a Race Against the Clock
From the moment your Human Resources Dept is served the wage garnishment, the service on them creates a lien on your paycheck.
See Collect Access LLC v. Hernandez (In Re Hernandez), BAP Nos. SC 12-1209, SC 12-1217 (9th Cir. BAP, Dec. 14, 2012).
RACE TO YOUR BANK RIGHT NOW. If your wages have been garnished, then there is a high probability that your bank accounts are about to be levied if they haven’t already. Stop what you are doing. But read the Disclaimer first. Then Stop reading this article and RACE to your Bank right now and drain your accounts.
Disclaimer: This is not legal advice and you are not my client. This post is for educational and recreational purposes only. Additionally it may be considered sound medical advice or possibly improve your golf game. Draining your accounts could cause you to bounce checks or other scheduled withdrawals. And you know what else does that, bank levies.
2. Filing Bankruptcy Before the Sheriff Gets your Money
Even if you file bankruptcy quickly, you might not get it back. However, it will stop any further garnishments moving forward. First you must file the bankruptcy. Then that bankruptcy notice must get to the Sheriff’s Office that served the wage garnishment. Additionally, that Sheriff’s Office must then fax or send a Notice of Stay to your payroll Department. ALL OF THAT must happen before the payroll department sends the fourth of your check to the Sheriff’s Office. If all those stars line up in time, then you get to keep your whole paycheck.
We can file the same day you come in to my office in Murrieta which is just North of Temecula. Same is true for Lake Elsinore, Menifee, Hemet, Moreno Valley or anywhere else in Southern California. However, that doesn’t mean that the Sheriff’s Office will serve the notice of stay on your payroll department that same day. They are short staffed and back logged. They’re also not open on the weekends.
3. Serving the Notice of Bankruptcy on the Sheriff
The Los Angeles Sheriff is easy and can be served by email. The Orange County Sheriff responds well to faxed notices of the bankruptcy filing. Sacramento will pick up on their faxes quickly as well. For most Sheriff’s Offices in San Diego County, a fax is probably going to be fine, but if you have the chance to walk them in, you should do it. If the notice is sent in via fax, we follow up with a phone call the Sheriff’s Office to make sure that they did receive it. However, you should also do a follow up phone call too just to be on the safe side. The squeaky wheel gets the grease.
However, in the Southern Riverside Sheriff’s Office on Auld Road in Murrieta, because they are short staffed, I’ve found that it’s better to walk in to their civil office with your bankruptcy paperwork in hand. Ask them to fax a notice of stay on the wage garnishment to your payroll department. Be sure to have your payroll department’s fax number with you when you go in.
If you’re lucky they’ll do it while you wait. If not, they might get to it that afternoon or the following day. This is the moment where my father’s relationship advice might kick in, “Sometimes you’ve just gotta cry some real tears.” Of course, in your case, they will in fact be real.
One client who was close with the people in her payroll department was able to obtain a hard copy of the notice of stay from the Sheriff and drive it to her payroll department that same day. That “saved her bacon,” to quote my mom.
4. Filing a Claim of Exemption
If your HR Department has already sent the money or if there is not enough time to both file the bankruptcy and get a notice of stay faxed from the Sheriff’s Office to your payroll before the payroll sends the money to the Sheriff, then another option is to file a claim of exemption. Exemptions are the legal protections that allow you to keep certain items of property when someone sues you. You must file a financial statement with it.
Basically, in your claim of exemption, you state that you must have all of your income to support yourself and your dependents and ask the judge to prohibit the garnishment or to reduce it.
In your financial statement you explain your income, expenses and your net worth to show why the wage garnishment must be stopped or reduced. It may be advisable to attach receipts for your rents, statements for car payments, receipts for medical expenses etc in order to prove up your expenses.
A claim of exemption filed can allow a Superior Court judge to reduce the wage garnishment to 20% or 15% or even 0%. A reduction to 0% is rare though.
5. A Claim of Exemption Takes Time to Work
Be patient. Once you file the claim of exemption you must serve it on the SHERIFF ONLY. You are not required to serve the creditor, the Sheriff’s Office does that for you.
Once you serve the sheriff with your claim of exemption, the sheriff will send a notice of claim of exemption to the creditor. From that date, the creditor has 10 days to file an objection to your claim of exemption.
The creditor must notify you of the hearing date at least 3 weeks prior to the hearing. The hearing will be about 30 days he files his opposition paperwork with the court. If the creditor does not oppose it, then you win by default and in that case the Sheriff’s Office will send the money back.
Keep in mind that you’re dealing with a government bureaucracy that is short staffed and has a mountain of paperwork. It may take weeks to get your money back . . . even if you win.
Because collection attorneys prefer easy pickin’s, they might just ignore you rather than setting up and attending a hearing on your claim of exemption. However, if your creditor is a former friend or a former landlord and has sued you without an attorney, then you can expect to be notified of a hearing.
6. Filing Bankruptcy After the Sheriff Already Has Your Money
This is going to be long, but you should read it to the end because it concerns both bank levies and wage garnishments, and you probably have both.
Because of recent case law, your Bankruptcy Judge has limited options to order the Sheriff to give your money back. In Collect Access v. Hernandez the appellate court ruled that your creditor has a lien on your pay check from the moment the wage garnishment is served.
There are two ways to protect your property in California. Both are found in the Code of Civil Procedure. However, you must elect one list of protections or the other, but you may not mix and match the two lists of protections.
- CCCP Section 704 and the associated list of protections that follow it, is great if you have a lot of home equity to protect. I call it the Home Owner’s List.
- CCCP Section 703.140(b) and the list contained in that section are great if you have little or no home equity. This list can only be used to protect your assets when you file a bankruptcy. I call it the Renter’s List.
In each list, your clothing, furnishings, work tools, jewelry, retirement and so on are all protected. Neither has a protection for money you’ve just socked into your savings account. However, there are differences between the two.
The Renter’s List has no specific protection for your recently earned wages or income, and none for your savings. What it does have is a much higher protection for automobiles. At this writing the protection is $5100. There is a homestead protection which at this writing is $22,075 to $25,575. The lesser number can be used to protect anything you want. If you have 5 year old paid for Mercedes C230, and an old project car such as a 1968 Mustang, then you can protect them both with the Renter’s homestead protection.
The Home Owner’s List allows you to protect 75% of your recently earned income, but none of your savings. Your home equity protection, at this writing, is $75,000 to $175,000 but your auto protection is only $2900. You do not get to spread your home equity protection around. That can only be used to protect your home and nothing else. So, if you have significant home equity to protect, and your car is a 5 year old paid for Mercedes C230 and you also have a 1968 Mustang in the garage with a smoking engine and a leaking transmission, you’re probably going to lose both cars.
You see, under the ruling of Collect Access v. Hernandez your bankruptcy judge can only order the Sheriff’s Office to turn the money over to you based on non-bankruptcy law.
Because the 703 Renter’s List of Exemptions was created by California specifically to protect your property in bankruptcy, your judge cannot order the return of your money unless you have used the other list of property protections under Section 704.
So, you can see your dilemma; the Renter’s List can’t help you, but the Home Owner’s List only protects 75% of your wages and your check was only garnished by 25% to begin with.
So, that’s a really long explanation to say that you’re up a creek without a paddle. However, the analysis is basically the same for bank levy, and in a bank levy this analysis works to your favor.
7. Claim of Exemption Revisted
Because you can only use the Home Owner’s list of property protections in a claim of exemption and because the only property in question in your claim of exemption is your income, then you are not risking your cars if you file a claim of exemption.
However, if you have a savings, you have to tell them about it in the financial statement, and now your savings and your bank accounts may be at risk for bank levy.
Sometimes the best thing to do is to file a bankruptcy and forget about the money that was garnished. This is especially true if you are paid weekly instead of monthly.
8. Sometimes You Get Lucky
If the Creditor sends a release to the Sheriff’s Office voluntarily once the bankruptcy is filed, you get lucky. The sheriff will not release the funds without a court order.
If no order comes from the superior court or a bankruptcy judge directly to the sheriff, then at the end of your case, it just so happens that your discharge order is a court order. If your case is dismissed rather than discharged, it also turns out that your dismissal order is a court order too.
If the Sheriff hears nothing prior to getting the discharge or dismissal order, the Sheriff will forward the money to your judgment creditor. However, if the creditor has sent a release to the Sheriff’s Office, then you just got lucky, and the Sheriff will send the money back to you instead.
So, once your bankruptcy is filed, send a fax to your creditor requesting that they comply with the bankruptcy code and send a release to the Sheriff’s Office. However, by now, most creditors know about Collect Access v. Hernandez.
9. They Must Serve the Wage Garnishment on You Too
When the wage garnishment is served on your Payroll Department, they are required to serve you too, and they will, of course. But it won’t be until after the Sheriff’s Office has had time first to serve the wage garnishment on your Payroll Department.
10. Why Didn’t You File Bankruptcy a Long Time Ago?
You can check the Courts’ online websites to see if your creditors have sued you. If you are seriously delinquent on your debts, if your creditors include deficiencies on repossessed cars, or Capital One Visa, or if you’ve received collection letters from Midland Funding or attorneys such as Nelson & Kennard or Hunt & Henriques, then if you haven’t been sued yet, you will be soon.
Check the Courts, if you find your name listed as a defendant, you may still want to go to the Court Clerk’s Office. Just to make sure that it’s not someone with the same name who was sued.
Check the County Recorder’s Offices to see if a creditor has recorded a judgment lien against you:
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