Tag Archives: California

California Bill Would Stop Wage Garnishments for Private Student Loans

StudentLoans_iStockA bill introduced in the California legislature (AB233) would prohibit wage garnishments if the underlying judgment was for private student loan debt. The bill, introduced by Assembly Member Bob Wieckowski (D – Fremont), would mean that private student loan lenders couldn’t come after the wages of students who could no longer pay their loans.

The Current Law

Right now, a private student loan lender can sue a student who is delinquent on loans. After getting a judgment, the lender can garnish up to 25% of the former student’s wages (or less in some instances). For details, see California Wage Garnishment Limits.

(To learn how wage garnishment works, see Nolo’s Wage Garnishment topic area.)

Which Loans Would Be Subject to the Wage Garnishment Ban? 

If the bill becomes law, it would not affect the ability of the federal government to garnish wages for the collection of federal student loans. Federal loans are those that are made or guaranteed by the federal government. Examples include Stafford Loans, Direct Loans, and PLUS Loans. Private student loans are those made by private lenders, not the government. (To find out if your loans are federal or private, see Nolo’s article What’s the Difference Between Private and Federal Student Loans?)

If you are struggling under a mound of student loan debt, visit our Student Loan Debt area for articles on government repayment plans and other ways to handle the debt.

 

Huge Drop in California Foreclosures Attributed to Homeowner Bill of Rights

FIFOCalifornia’s real estate market had good news in January — the rate of foreclosures dropped by a whopping 39.5% (as compared to December).  Although foreclosure rates were down in the nation overall, California’s drop was far greater than that of any other state.

Experts are attributing this drastic change in foreclosure rates to California’s new Homeowner Bill of Rights, which went into effect on January 1, 2013. The new law forbids dual tracking (when a mortgage servicer proceeds with foreclosure while it’s also considering a homeowner’s application for a loan modification) and requires servicers to provide homeowners with a single point of contact, among other things. (To learn more about the new law, see Nolo’s article California Foreclosure Protection: The Homeowner Bill of Rights.)

California Bankruptcy Exemption Amounts Increase

Changes to California bankruptcy exemption laws, effective January 1, 2013, have increased some of the exemption amounts available to people filing for bankruptcy in California.

What Are Bankruptcy Exemptions?

Most people who file for Chapter 7 bankruptcy in California are able to discharge most or all of their debts. In return, they must turn over certain property to the bankruptcy trustee, which the trustee will use to repay creditors. However, California law allows you to protect certain types of property in bankruptcy — meaning you don’t have to give the property to the bankruptcy trustee. These laws are called exemptions. Exemptions play a role in Chapter 13 bankruptcy as well.

To learn more about how exemptions work in bankruptcy and the exemption amounts in each of the 50 states, visit Nolo’s  Bankruptcy Exemptions topic area.

2013 Changes to California Bankruptcy Exemptions

California Assembly Bill 929, which took effect on January 1, 2013, made some changes to California bankruptcy exemptions.  Here are some of the highlights of those changes:

  • the motor vehicle exemption increased to $4,800 and you can now exempt more than one vehicle (previously you could only exempt the equity in one vehicle)
  • the homestead exemption amount increased to $24,060
  • the tools of the trade exemption amount increased to $7,175
  • the wildcard exemption increased to $1,280, and
  • you can now exempt personal injury recoveries for pain, suffering, and actual pecuniary loss (before these types of damages were excluded from the personal injury recovery exemption) and the total exemption amount increased to $24, 060.

To learn more about the California bankruptcy exemptions, as well as a list of other common exemption amounts, see Nolo’s article California Bankruptcy Exemptions.

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California Governor Signs Homeowners’ Foreclosure Rights Law

Last week, California Governor Jerry Brown signed into law historic homeowner-rights mortgage legislation that offers some of the country’s strongest borrower protections against bank foreclosure practices. The protections, part of a Homeowner Bill of Rights sponsored by California Attorney General Kamala Harris, include the following:

  • the prohibition of “dual tracking”—banks’ practice of negotiating loan modifications while simultaneously pursuing foreclosures
  • the banning of robo-signing (as well as the creation of a private right of action if banks violate the law under certain conditions; state agencies and private citizens may recover compensation, including damages of up to $50,000, if lenders willfully, intentionally, or recklessly violate the law); and
  • the requirement that lenders assign a single representative for borrowers to work with through the loan modification process.

This overhaul of foreclosure laws doesn’t apply to strategic defaulters (those who can afford to pay their underwater mortgages but choose to walk away) and only offers protection to borrowers who own and occupy their properties of four units or less.

To read the text of the new law, go to the California Legislative Information website and search for bill number SB-900 or AB-278.

What Happens to Delinquent Property Taxes After Foreclosure?

 

ASK LEON

Bankruptcy expert Leon Bayer answers real-life questions.

Dear Leon,

I received a property tax bill on my house in California. I recently did a bankruptcy. I am also in foreclosure and I plan to move out of the property before the foreclosure sale is held.

One question that popped into my head about the property taxes is, bankruptcy aside, I have continued to live here and this has been my primary residence.  This being the case, can the tax collector maintain that the property taxes are my responsibility?

Thank you,

Rita

Dear Rita,

I just happen to have the answer you need.

You do not have to pay the property taxes, and in fact you shouldn’t. The taxes will be paid by your lender. After your lender forecloses, all sums that you owed, including the taxes, are satisfied by the transfer of the property to the lender under a foreclosure deed.

The property taxes are actually a debt against the property, not against you personally. If the taxes go unpaid long enough, the state will eventually hold a tax sale and auction off the property. In California, that time period is five years.

As a general rule, most properties subject to a mortgage will never face a tax sale, because the lender will advance money to pay the delinquent taxes. The lender will then demand reimbursement from the borrower. If it goes unpaid, the lender can foreclose on the property, just the same as it does when the normal loan payments are delinquent.

The fine print in a mortgage contract says that the borrower must maintain current taxes, and failure to do so is a monetary breach that may subject the property to foreclosure. Since in your case you are facing a foreclosure anyway for nonpayment of the mortgage, your nonpayment of the taxes will never matter.

-Leon

Guest blogger Leon Bayer practices bankruptcy law in Los Angeles, California.  He is a partner at Bayer, Wishman & Leotta.  

The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.