A levy can move a judgment creditor closer to payment—until someone other than the debtor claims the property belongs to them. A spouse, business partner, lender, or related company may assert an interest that limits collection. California provides a specific process for resolving these disputes, with short deadlines and important procedural choices. This guide explains how creditors can evaluate a third-party claim, preserve their options, and decide whether contesting the claim makes economic sense.
Third party claim levy California: the basic rules
A judgment generally permits collection from property subject to enforcement against the judgment debtor. It does not give the creditor unrestricted access to assets belonging to someone else. California’s third-party claim procedures, found in Code of Civil Procedure section 720.010 and following sections, provide a way for a nondebtor to assert certain interests in levied property.
Claims may involve ownership or a right to possession under Code of Civil Procedure section 720.110, or a security interest or lien in levied personal property, including fixtures, under section 720.210. In each case, the claimed interest must be superior to the creditor’s lien. The security-interest and lien procedure does not apply to a real-property levy. For example, a supplier might claim that equipment seized at the debtor’s business belongs to the supplier. A lender might assert a superior lien on that equipment. These are different interests, and the applicable procedures and potential recovery may differ.
A third-party claim is also different from a debtor’s claim of exemption. The former concerns another person’s interest; the latter generally concerns statutory protection for the debtor’s property. Creditors should identify which procedure actually applies rather than treating every objection as the same dispute.
For California businesses and individuals pursuing judgments, careful debt collection planning includes checking ownership and existing liens before selecting assets for levy.
Respond promptly and preserve the levy record
A third-party claim usually reaches the creditor through the levying officer, often the sheriff. The first task is to review the complete claim, the officer’s notice, and every relevant date. Do not assume that sending an objection letter preserves the levy or obtains a court hearing.
California’s procedures can require action within short periods. For an ownership or possession claim, Code of Civil Procedure section 720.140(b) generally gives the creditor 10 days after service of the claim and required notices to object to the third person’s undertaking or file a creditor’s undertaking satisfying section 720.160. Security-interest and lien claims have separate requirements under section 720.210 and following sections; do not assume the ownership-claim procedure applies.
Under section 720.310(a), either the creditor or the third person generally may petition for a hearing no later than 15 days after the third-party claim is filed with the levying officer. Under section 720.310(b), the hearing generally must be held within 20 days after the petition is filed unless the court continues it for good cause. Preserving the levy and requesting a court determination are separate requirements, and taking one step does not necessarily satisfy another.
- Record the timeline: Identify when the claim was filed, when notices were served, and any scheduled sale or distribution.
- Identify the asserted interest: Determine whether the claimant alleges ownership, possession, or a lien.
- Collect the enforcement papers: Preserve the writ, levy instructions, officer’s return, claim, and accompanying documents.
- Confirm preservation requirements: Determine whether an undertaking, deposit, petition, or other action is necessary.
- Assess remaining collection options: A dispute over one asset does not necessarily prevent lawful enforcement against other assets.
The creditor should obtain advice promptly about the applicable deadlines. The officer’s notice is important, but it should not substitute for reviewing the governing procedure.
Test ownership and lien evidence—not just labels
The central question is whether the claimant has the interest asserted and how that interest affects the levy. A statement that property “belongs to our affiliate” is not the same as evidence establishing ownership. Conversely, property located at the debtor’s premises is not necessarily the debtor’s property.
Useful evidence may include:
- Purchase agreements, invoices, payment records, and delivery documents.
- Leases, consignment agreements, and records identifying particular equipment.
- Bank statements showing deposits, transfers, and the source of funds.
- Security agreements, financing statements, and evidence relevant to lien priority.
- Business records showing how the debtor and claimant treated the asset before the levy.
Timing matters. A transfer shortly before enforcement may warrant scrutiny, but timing alone does not establish that the claimant lacks a valid interest. Likewise, a financing statement alone does not establish every element of an enforceable security interest or resolve priority.
Entity boundaries matter too. A judgment against an individual does not automatically authorize seizure of assets owned by that individual’s LLC or corporation. Community property and jointly held assets can raise additional questions that require separate analysis.
Choose whether to contest, negotiate, or redirect collection
At a statutory hearing on a third-party claim—including a claim of ownership, possession, security interest, or lien—Code of Civil Procedure section 720.360 places the burden of proof on the third person, generally by a preponderance of the evidence. That does not make a creditor’s preparation optional or relieve the creditor of any burden applicable to its own affirmative grounds for challenging the claimed interest. Documents, admissible evidence, and a clear explanation of disputed transactions remain important.
Compare the likely recoverable value with the cost and risk of proceeding. Account for senior liens, sale expenses, legal fees, and any required undertaking. Contesting a claim to equipment with little remaining equity may consume resources better directed toward another collection source.
A creditor’s undertaking under Code of Civil Procedure section 720.160 is generally $10,000 or twice the amount of the execution lien as of the levy, whichever is less, unless the creditor elects a larger amount, subject to the statute’s exceptions and adjustment provisions. It must indemnify the third person against losses, liability, damages, costs, and attorney’s fees incurred because of the enforcement proceedings if a final judgment determines that the third person owns or has the right to possess the property. This undertaking can expose the creditor and surety to liability; continuing enforcement deserves a deliberate assessment.
Negotiation may resolve a genuine dispute through an agreed release, allocation of proceeds, or payment arrangement. Any agreement should clearly identify the property, necessary instructions to the levying officer, and rights being preserved or released. Suspected voidable transfers may require additional proceedings rather than assuming the third-party claim process resolves every issue.
Talk to a California business attorney
Itkin Law offers a free consultation to California businesses and individuals evaluating third-party claims, levy deadlines, and judgment enforcement options. Schedule a free consultation or call (424) 603-8888.
This article is attorney advertising and provides general information only. It is not legal advice and does not create an attorney–client relationship. The law changes, and this article reflects the law as of its publication date. Every situation is different — contact us to discuss how the law applies to your exact circumstances. See our full disclaimer.
