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Vehicle Levy Math
Levying a judgment debtor's vehicle is expensive and complicated. This article has a vehicle levy math example, based on California laws, with example approximate costs.
Laws vary widely in each state, so always check local laws and the court for procedures, and verify costs with your local Sheriff department.
In California, when Sheriff levies are not bank accounts or wages, the judgment debtor's property must be sold at a Sheriff auction. This makes levies of anything except bank accounts and wages very expensive.
The auction process is an imperfect sales mechanism that usually yields relatively low prices, reducing the amount available for the judgment creditor. One day, perhaps Sheriff auctions will be on EBay.
The first expense is the debtor's State exemption. That exemption is only for one vehicle (the first vehicle) owned by the debtor. The California exemption starts at $2,725, and if they use their vehicle in their work as a commercial vehicle, the exemption is $5,900. The first $2,725 or $5,900 from an action sale, goes back to the judgment debtor.
The cost of buying a writ of execution from the court is $25. The Sheriff charges about $1,000 to start a levy auction procedure.
The good news is the Sheriff often allows you to deposit half the required amount (e.g., $500) to start. The bad news is that is just the beginning of an upward spiral of costs that could sometimes make one regret levying their judgment debtor's vehicle.
After the (so far) $3,725 or $6,900 in expenses, there is the cost of the Sheriff's office charges to store the vehicle. In this article, the example is 30 days at $35 per day for vehicle storage costs, totaling $1,050.
In some situations, for example when the Sheriff is backlogged, or the judgment debtor files for bankruptcy protection, the storage costs you must always pay, go up dramatically.
One more way that bankruptcy is unfair to judgment creditors that levy a judgment debtor's vehicle, is that creditors must pay levy storage fees, even if the judgment debtor's bankruptcy is eventually denied. Four months of storage fees might cost about $4,200.
After all these costs, the auction fees are usually about ten percent of what the vehicle sells for.
In this example so far, we are up to at least $4,775 or $7,950. To break even, the vehicle must sell for at least $5,306 or $8,840, to have a chance of paying anything toward satisfying the judgment.
Last but not least, there could also be the cost of paying off any previous loans on the vehicle.
The opening price bid at an auction is usually the costs of the debtor exemption and paying off all previous loans and liens on the vehicle.
Always attend Sheriff auctions when your judgment debtor's property is up for sale. While you might be able to credit bid at an auction, you cannot credit bid for the debtor's exemption, or to pay off any previous loans on the vehicle.
When assets are collected using a writ and a levy action, they are applied first to the cost of obtaining a writ, second to accrued interest, third to the levying officers fees and costs for performing the levy, and fourth to the judgment principal.
If the opening auction bid price is not met, the $25 writ, at least $500 (often $1,000) of the Sheriff department's fee, and (at least) $1,050 for vehicle storage, are your costs, even if the vehicle does not sell.
As mentioned earlier, vehicle storage fees could be prohibitive. If there are delays, it could be $4,000 or so, meaning you might be out of pocket more than $5,000. (You might get some of the Sheriff's fees back.)
I am not a lawyer. My opinion is that if the vehicle does not sell, it is often returned to the judgment debtor, and you may not be able to add your massive expenses to what the judgment debtor owes, which seems very unfair.
Here is a hypothetical example of costs for a California vehicle levy. This example assumes a good situation, where it makes sense to levy the judgment debtor's vehicle. As mentioned earlier, in many cases, you can lose a lot of money trying this.
In this example, the judgment debtor's vehicle is a car, with a Kelley Blue Book private-party value of $15,000, and a previous $4,000 loan that must be paid off.
The winning bid at the auction (75 percent of the Kelley Blue Book private-party value) was $11,250.
The fees could go like this: $11,250, minus a 10% auction fee of $1,125, minus $4,000 to pay off the previous loan, minus the judgment debtor exemption for their personal vehicle of $2,725, leaving a gross amount for the judgment creditor of: $6,125.
That $6,125 gross amount has expenses. The storage fee for example, is $1,000. Also, writ and levying officer fees of $525, auction detailing and inspection fees of $400, leaving a net $4,560 for the judgment creditor.
After an auction sale, as with a bank levy, the sheriff returns the writ of execution to the court, showing the amount paid to the creditor. That amount is credited toward paying the judgment, no matter what massive expenses the judgment creditor incurred.
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