Failing to pay a debt when it is due can lead to a lawsuit and eventually a judgment. If the judgment is not paid, further court action can be taken to enforce payment by seizing the debtor's assets. California law exempts certain types of assets from being seized to pay judgments and exempts other assets up to a maximum dollar amount. Some federal laws also exempt assets from seizure and these laws apply in California as well.
Enforcement of Judgment Basics
To recover payment on a delinquent debt, a creditor is entitled to file a lawsuit in civil court to obtain a money judgment against the debtor. If such a judgment is made, the debtor is obligated to pay the judgment or risk having his assets seized to pay toward the judgment. The court will issue a writ of execution for any unpaid judgment. The writ is delivered to the county sheriff with instructions to seize the debtor's assets by such means as a wage garnishment where the debtor works or a levy on the debtor's bank account. In these situations, the debtor is entitled to assert any applicable legal exemptions that may prevent the seizure of his assets to pay on the judgment.
Exemptions Under Code of Civil Procedure
California law is set forth in statutes categorized according to codes. The primary source for exemptions from enforcement of judgments is found in the Code of Civil Procedure, starting at section 704.010 and continuing through section 704.210. For example, section 704.020 fully exempts household furnishings, appliances and personal effects located at the debtor's primary residence that are considered ordinary and reasonably necessary to the debtor and members of the debtor's family. For exemptions that only apply up to a certain dollar value, the California Judicial Council provides a current list of the exemption with the specified value. For example, as of September 2010, motor vehicles are exempt up to $2,725 and property used in the debtor's trade or business up to $7,175.
One of the most valuable asset exemptions is the homestead exemption set forth in Civil Code section 704.710 through section 704.850. This exemption protects homeowners from losing all of the equity in their home to a money judgment. The amount of the exemption varies depending on the debtor's circumstances. For example, the basic exemption is $75,000, which means that the debtor's home cannot be sold to satisfy a judgment if the equity in the property is $75,000 or less. For married couples or extended families living together, the exemption is $100,000. For a debtor who is 65 or older, or mentally or physically disabled, the exemption amount is $175,000.
United States Code Exemptions
Federal law also protects certain assets from money judgments that are treated as exemptions under California law. For example, persons receiving social benefits, such as Social Security, can claim these benefits as exempt from a money judgment. Military retirement benefits are likewise exempt. The California Judicial Council provides a complete list of the exemptions based on federal law along with a list of exemptions based on California law.