Bill to protect debtors is headed to state Assembly vote

A bill that would protect the last few dollars in a debtor's bank account is headed to a vote in the full state Assembly.

Jessica Bartholow with the Western Center for Law and Poverty testified SB 616 is needed in part because cuts to federal aid programs are worsening the nation's consumer debt crisis and creating a "tsunami" of work for legal aid lawyers who are trying to protect the last assets of low-income people.

The bill's author, Sen. Bob Wieckowski, D-Fremont, agreed last week in the Assembly Appropriations Committee to take several amendments to make SB 616 more palatable to the financial industry. One change extends a creditor's deadline to contest an exemption to debt collection from 10 days to 15.

The bill's limit was changed from a debtor's last $2,000 to instead refer to "the minimum basic standard of adequate care for a family of four."

Sonia Gibson, a senior manager with Encore Capital Group, said as the bill is written, the amount that could be protected would about $1,724.

"There is still absolutely no means test being added. It's an automatic exemption protecting all judgment debtors," Gibson said.

She also said the bill doesn't adequately address debtors who try to hide money in different bank accounts. This could be very costly to the state, she added, due to an ex parte requirement that parties "shall" go to court if there is a dispute involving multiple accounts.

-- Malcolm Maclachlan