Court Clarifies Earnings Exemption

   Under California’s earning exemption laws, 75% of wages paid to an employee within 30 days of the date of levy are exempt. The law further provides: 1) all of the paid earnings are exempt if prior to payment to the employee they were subject to a garnishment; and 2) to the extent money in deposit accounts, or cash, can be traced to an exemption it remains exempt.

  100 Dollar BillsOne interpretation of the statutes is that so long as money in a deposit account, or cash, can be traced to earnings received before garnishment, those earnings are exempt from further levy. Another interpretation, and the one adopted by the court in Sourcecorp, Inc. v. Shill, is that only those earnings paid in the 30-day period before the garnishment are exempt. The court reasoned that any earnings paid before this 30-day period and still in the debtor’s possession are no longer “earnings” within the meaning of the exemption statute and thus subject to further levy.

  End result: Once a debtor has had 30 days to pay for the necessities of life out of exempt earnings, the remainder becomes available to satisfy the debtor’s outstanding obligation to a judgment creditor.

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