USAA v. AFC CAL LLC (2026)

MEMORANDUM DECISION

Case Summary

[1] AFC Cal, LLC (“AFC”), a judgment creditor, sought to garnish two deposit accounts held by judgment debtors, Chala Bickham and Eddie Bickham Jr. (the “Judgment Debtors”). The garnishee bank, USAA Federal Savings Bank (“USAA”), filed a Garnishee Answer and claimed that the funds were exempt under a federal regulation and/or applicable state law, without identifying the state or the exemption statutes. The trial court ordered the funds turned over to AFC. USAA then filed a motion to correct error, arguing for the first time that the funds were exempt under California law and that it had standing to assert that exemption. The trial court denied the motion, and USAA now appeals. We affirm.

Issue

[2] USAA presents two issues, which we consolidate and restate as whether the trial court abused its discretion by ordering the funds in the USAA accounts turned over to AFC without addressing the exemption asserted in USAA's Garnishee Answer.¹

Facts

[3] In May 2023, AFC filed a complaint against Truhaul Transport LLC (“Truhaul”), alleging that Truhaul had breached a promissory note and security agreement (the “Note”) and, therefore, owed AFC, as the holder of the Note, $26,008.58, plus fees, interest, and costs. The complaint also alleged that the Judgment Debtors were personally liable for the debt under a guaranty (the “Guaranty”) that both Judgment Debtors signed.² Truhaul and the Judgment Debtors were served with the complaint, but they did not appear or respond. On July 31, 2023, the trial court granted AFC's motion for default judgment.

[4] In June 2025, AFC initiated proceedings supplemental, and the trial court set the matter for a hearing to be held on October 29, 2025. The orders to appear served on the Judgment Debtors included a “Notice of Certain Exemptions and Your Right to a Prompt Hearing.” Appellee's App. Vol. II p. 3. This notice explained that certain funds may be exempt from garnishment under state and federal law, and it set out the procedure for claiming an exemption, which included completing an exemption form. The orders to appear also notified the Judgment Debtors that “[f]ailure to appear [at the October 29, 2025 hearing] will result in the Court conducting the proceeding without the participation of the party, which may include the entry of orders for relief requested at the hearing, and any other order adverse to the party that has failed to appear.” Id. at 2, 6. The Judgment Debtors never completed an exemption form, claimed any exemptions, or appeared at any hearing.

[5] On September 23, 2025, AFC sent USAA a notice of garnishment proceedings, a summons, an order to answer interrogatories, and a notice of hearing (collectively, the “Notice”). The Notice stated that, as of that date, the unpaid judgment had grown to a principal sum of $31,873.59, post-judgment interest of $5,955.69, and costs of $556.00, for a total of $38,385.28. The Notice directed USAA “to answer under oath the interrogatories set forth below or attached in writing within 30 days after service, or, at your option, appear in Court and answer the interrogatories in person at the hearing.” Appellant's App. Vol. II p. 55. The Notice further provided that “[a]ny claim or defense to the proceedings supplemental or garnishment order must be presented at the time and place of the hearing specified herein,” and noted that the hearing was set for October 29, 2025. Id. USAA was served with the Notice on October 2, 2025.

[6] USAA elected to answer the interrogatories in writing before the hearing. In a sworn Garnishee Answer filed on October 16, 2025, USAA identified two accounts held in the Judgment Debtors’ names: a joint checking account of Eddie Bickham Jr. and Chala Bickham with a balance of $635.50, and a savings account of Eddie Bickham Jr. with a balance of just $3.00. The Garnishee Answer listed the Judgment Debtors’ Victorville, California, address for each account. As to each account, USAA stated that the funds were “exempted/protected pursuant to (a) 31 CFR § 212, et seq. and/or (b) applicable state law,” and that “the total amount subject to garnishment/ levy/execution is $0.00.” Id. at 61. The Garnishee Answer, however, did not cite a California exemption statute or state an exemption amount. USAA did not appear at the October 29, 2025 hearing or file any memorandum in support of the exemption asserted in its Garnishee Answer. Nor did it request a continuance or a separate hearing on the exemption.

[7] AFC appeared by counsel at the October 29, 2025 hearing; the Judgment Debtors and USAA, as noted, did not appear. On November 12, 2025, the trial court entered an order (the “Garnishment Order”) directing USAA to turn over the funds in the Judgment Debtors’ accounts to AFC's counsel so that the funds could be applied toward the judgment. The Garnishment Order did not address any exemptions.

[8] On December 11, 2025, USAA filed a motion to correct error, which it amended the following day. In its amended motion to correct error, USAA argued for the first time that it had standing to assert the Judgment Debtors’ exemptions in order to avoid conflicting legal obligations; that California law governed because the Judgment Debtors are California residents; that the account balances of $635.50 and $3.00 fell within California's automatic deposit-account exemption of $2,244; and that the entry of the Garnishment Order following an off-record hearing violated due process.

[9] In support of its amended motion, USAA attached a consent order (the “Consent Order”), which had been issued by the federal Consumer Financial Protection Bureau (“CFPB”) in a 2022 administrative proceeding against Bank of America. The Consent Order set forth the CFPB's findings that Bank of America had engaged in unfair and deceptive acts and practices by, among other things, failing to apply the appropriate state exemptions to consumer deposit accounts after receiving garnishment notices and by applying the exemptions of the garnishment-issuing state rather than those of the consumer's state of residence. Bank of America consented to the Consent Order without admitting or denying the CFPB's findings. AFC filed a reply to USAA's amended motion to correct error on January 5, 2026. On January 8, 2026, the trial court denied the amended motion to correct error. USAA now appeals.

Discussion and Decision

I. Standard of Review

[10] A trial court is vested with broad discretion when conducting proceedings supplemental. Ill. Founders Ins. Co. v. Horace Mann Ins. Co., 738 N.E.2d 705, 708 (Ind. Ct. App. 2000). A judgment rendered pursuant to proceedings supplemental is a general judgment. Id.; see also Gallant Ins. Co. v. Allstate Ins. Co., 723 N.E.2d 452, 454 (Ind. Ct. App. 2000) (“It is well settled that special findings do not apply in proceedings supplemental.”) (citing Ind. Code § 34-55-8-9). We, therefore, will not disturb the judgment “unless the record does not provide sufficient support for any theory on which the judgment may be sustained,” and we may affirm “on any legal theory supported by the evidence most favorable to the judgment, together with all reasonable inferences to be drawn therefrom.” Prime Mortg. USA, Inc. v. Nichols, 885 N.E.2d 628, 668-69 (Ind. Ct. App. 2008).

[11] USAA also filed an amended motion to correct error, which the trial court denied.³ We review the denial of a motion to correct error for an abuse of discretion, which occurs if the trial court's decision is clearly against the logic and effect of the facts and circumstances before it, or when the court has misinterpreted the law. Bruder v. Seneca Mortg. Servs., 188 N.E.3d 469, 471 (Ind. 2022). We review any questions of law de novo. Id.

II. The trial court did not err by ordering USAA to turn over the funds in the Judgment Debtors’ accounts held by USAA.

A. USAA did not adequately assert the California exemption in its Garnishee Answer.

[12] USAA first claims that it has standing to assert on behalf of the Judgment Debtors the exemption found in California Code of Civil Procedure Section 704.220 and that the trial court abused its discretion by ordering the funds in the USAA accounts to be turned over to AFC without addressing this exemption. Assuming, without deciding, that USAA has standing to assert the California exemption on behalf of the Judgment Debtors, we cannot say that the trial court abused its discretion by not applying the exemption.

[13] An exemption to garnishment is an affirmative defense that must be pleaded as well as proved. Dumka v. Erickson, 70 N.E.3d 828, 833 n.2 (Ind. Ct. App. 2017). Here, in its Garnishee Answer, USAA answered the interrogatories in writing instead of appearing, as provided for in the Notice. See Appellant's App. Vol. II p. 55 (ordering USAA “to answer under oath the interrogatories set forth below or attached in writing within 30 days after service, or, at your option, appear in Court and answer the interrogatories in person at the hearing”).⁴ USAA's Garnishee Answer stated that it held accounts in the Judgment Debtors’ names with balances of $635.50 and $3.00. The Garnishee Answer then stated these accounts “are exempted/protected pursuant to (a) 31 CFR § 212, et seq. and/or (b) applicable state law,” and that “the total amount subject to garnishment/ levy/execution is $0.00.” Id. at 61.

[14] USAA's Garnishee Answer failed to identify which state's law USAA invoked, failed to cite any exemption statute, and failed to state any exemption amount. The Garnishee Answer simply listed a federal regulation—which USAA does not even argue applies here—along with a generic reference to “applicable state law.” Id. USAA notes that the account table included in its Garnishee Answer disclosed a California address for both depositors. But listing an address that includes the state in which a depositor resides is not the equivalent of asserting that a specific exemption contained in that state's laws is applicable.

[15] Even if the Garnishee Answer stated that “California law” was applicable, that would have fallen well short of asserting that California Code of Civil Procedure Section 704.220, or the $2,244 exemption provided for in that statute, applied to the Judgment Debtors’ accounts. California lists its exemptions from enforcement of money judgments in an article of its Code of Civil Procedure that contains thirty separate sections, each addressed to a different category of property and each with its own conditions and limits. See Cal. Civ. Proc. Code §§ 704.010 – 704.235. Our Supreme Court has held that a court generally “is not charged with identifying and applying the entire gamut of exemptions.” Branham v. Varble, 952 N.E.2d 744, 748 (Ind. 2011).

[16] A garnishee's conclusory assertion of a defense, unaccompanied by the legal or factual basis necessary to establish it, does not adequately plead that defense. See Old Plank Trail Cmty. Bank, N.A. v. Mattcon Gen. Contractors, Inc., 137 N.E.3d 308, 311 (Ind. Ct. App. 2019) (holding that garnishee waived set-off defense where its interrogatory answers referenced a potential set-off but omitted supporting loan documents, payment histories, or notices of default and failed to present or prove the defense at the hearing as ordered by the trial court). Thus, we cannot say that the trial court abused its discretion by ordering USAA to turn over the funds in the Judgment Debtors’ accounts to AFC without addressing USAA's vague reference to “state law.”⁵

B. The case law USAA relies on is distinguishable.

[17] USAA, nevertheless, argues that the trial court was required to consider a possible exemption once the Garnishee Answer brought the possibility of an exemption to the court's attention. We disagree.

[18] “The general rule of civil litigation is that [ ] exemptions must be asserted by the debtor.” Branham, 952 N.E.2d at 747 (citing Mims v. Commercial Credit Corp., 307 N.E.2d 867, 869-70 (Ind. 1974)). In Mims, our Supreme Court recognized a narrow exception to this general rule. Specifically, if a debtor appears without counsel, the trial court must determine whether the debtor is a resident-householder and, if so, which of two identified statutory exemptions—the one in the Uniform Consumer Credit Code, or the then-applicable resident-householder exemption—is least burdensome on the debtor. Mims, 307 N.E.2d at 869-70.

[19] In Branham, our Supreme Court extended this reasoning to the general wage exemption and the federal SSI exemption ⁶ in small claims cases, where trials are “ ‘informal, with the sole objective of dispensing speedy justice between the parties according to the rules of substantive law.’ ” 952 N.E.2d at 747 (quoting Ind. Small Claims Rule 8(A)). The Court held that “the very ordinary statutory exemptions” at issue in that case were not waived by an unrepresented litigant's failure to plead them. Id. at 748. The Court was careful, however, to confine its holding. It reaffirmed that a trial court should be careful not to become an advocate for a party, especially “for represented parties on the plenary dockets.” Id. at 747. And, as noted above, the Court emphasized that a judge generally “is not charged with identifying and applying the entire gamut of exemptions.” Id. at 748.

[20] Neither Mims nor Branham supports USAA's position. The exceptions to the general rule that exemptions must be asserted by the debtor that are set forth in those cases are meant to protect unrepresented judgment debtors, and, in both of those cases, it was the debtor who invoked the exception. Here, the Judgment Debtors did not appear or claim any exemption, and they are not active parties to this appeal. The concerns underlying the exceptions set forth in Mims and Branham are, accordingly, not relevant here. USAA is a sophisticated party—a national bank represented by counsel. And this is not a small claims matter; it is a commercial collection action litigated on the plenary docket.

[21] We also find USAA's citation to Dumka, 70 N.E.3d 828, to be unavailing. In that case, the trial court applied an Indiana exemption statute sua sponte and denied garnishment. The judgment creditor appealed, and we held that the trial court did not abuse its discretion by taking judicial notice of the exemption statute. Id. at 833. The fact that a trial court may take judicial notice of a statute does not establish that it errs by failing to do so. Moreover, the exemption at issue in Dumka was set forth in an Indiana statute, with which Indiana trial courts are well versed.

[22] Here, in contrast, USAA's Garnishee Answer did not identify the applicable state or any specific exemption statute. USAA would have us conclude that the trial court was obligated to identify the proper jurisdiction, locate the applicable exemption within that jurisdiction's statutes, case law, or regulations, and calculate the exemption amount—all without any guidance from USAA. We decline to impose such a burden on our trial courts. Unlike the exemptions at issue in Branham, the California deposit-account exemption is not the “stuff of everyday life” in Indiana collections cases.⁷ 952 N.E.2d at 748.

C. USAA cannot rely on arguments presented for the first time in its motion to correct error.

[23] We also cannot ignore that it was not until its motion to correct error that USAA for the first time argued specifically that California Code of Civil Procedure Section 704.220 exempted the account balances and that the Consent Order obligated it to withhold the funds.⁸ It is well-settled that an issue raised for the first time in a motion to correct error is waived. Cunningham v. Barton, 139 N.E.3d 1081, 1092 (Ind. Ct. App. 2019) (citing Troxel v. Troxel, 737 N.E.2d 745, 752 (Ind. 2000)). Here, the Judgment Debtors’ California address was known to USAA, and California Code of Civil Procedure Section 704.220 is a published statute in effect since 2020. Nothing USAA advanced in its motion to correct error was unavailable to it when it filed its Garnishee Answer. We, therefore, conclude that the trial court did not abuse its discretion by denying USAA's amended motion to correct error.

Conclusion

[24] Assuming that USAA may assert an exemption belonging to the Judgment Debtors, its Garnishee Answer did not adequately assert the California exemption it now claims, and the trial court was not required to identify which state's law was applicable and which exemptions applied, all on its own. Nor could USAA assert the exemption for the first time in its motion to correct error. Accordingly, we affirm the judgment of the trial court.

[25] Affirmed.

FOOTNOTES

1.   USAA also claims that it has standing to assert the exemption on behalf of the Judgment Debtors. As discussed below, we decline to address this issue because, assuming arguendo that USAA has standing to assert the exemption, it failed to adequately plead and prove the claimed exemption.

2.   Truhaul and the Judgment Debtors agreed that the Note, the Guaranty, and all related agreements were governed by the substantive laws of Indiana. The Note and the Guaranty also included a forum selection clause, under which Truhaul and the Judgment Debtors agreed that personal jurisdiction over any action between them and AFC existed in Indiana state and federal courts, with Marion and Hamilton County courts listed as proper venues.

3.   USAA notes that the trial court initially indicated it would hold a hearing on the amended motion to correct error but then denied the motion without holding such a hearing. “ ‘This Court has long and consistently held that a trial court is not required to conduct an evidentiary hearing on a motion to correct error.’ ” In re Estate of Wheat, 858 N.E.2d 175, 185 (Ind. Ct. App. 2006) (quoting Ortiz v. State, 766 N.E.2d 370, 376 (Ind. 2002)). “If the evidence before the trial court in the motion to correct errors was sufficient to support its decision, the court could rule on the motion without a hearing.” Id.

4.   AFC contends that USAA's failure to appear at the garnishment hearing waived its defenses. Because we conclude that the Garnishee Answer did not adequately assert the exemption, we need not address this waiver argument.

5.   We cannot agree with USAA's argument that the California exemption is automatic and self-executing and that this, therefore, excuses it from identifying the exemption. A court cannot be said to have ignored an exemption it has not been told applies.

6.   SSI is an acronym for Supplemental Security Income. Branham, 952 N.E.2d at 748. Pursuant to 42 U.S.C. § 407(a), “SSI is not subject to garnishment for payment of a judgment.” Id.

7.   We also disagree with USAA's argument that the trial court violated due process by entering the Garnishment Order after an off-record hearing at which neither USAA nor the Judgment Debtors were present. Procedural due process requires notice and an opportunity to be heard. Melton v. Ind. Athletic Trainers Bd., 156 N.E.3d 633, 649 (Ind. Ct. App. 2020); Ind. State Bd. of Educ. v. Brownsburg Cmty. Sch. Corp., 842 N.E.2d 885, 889 (Ind. Ct. App. 2006). A party who receives notice of a hearing but fails to appear or participate voluntarily waives the opportunity to be heard at that hearing. Bailey v. Rev. Bd. of Ind. Dep't of Workforce Dev., 132 N.E.3d 386, 390-91 (Ind. Ct. App. 2019). Here, USAA was served with the Notice, which gave it the choice to either answer the interrogatories in writing or appear at the October 29, 2025 hearing and answer them in person. USAA answered in writing. Having elected not to attend the hearing, USAA cannot now claim a due process violation because it did not appear at the hearing. The same is true of the Judgment Debtors, who received notice of the hearing and of their exemption rights and failed to appear. Nor does the lack of a transcript or written findings establish a due process violation. Proceedings supplemental are summary in nature. Com. Credit Counseling Servs., Inc. v. W.W. Grainger, Inc., 840 N.E.2d 843, 847 (Ind. Ct. App. 2006). USAA cites no authority for the proposition that due process requires a recorded hearing in proceedings supplemental, and our research has revealed no such authority.

8.   USAA claims that the Consent Order was a regulatory mandate binding all similarly situated institutions. AFC claims that USAA was not a party to that regulatory case and that the Consent Order binds only Bank of America. Regardless, the Consent Order was issued in 2022, yet USAA did not refer to the Consent Order until its motion to correct error, which was filed in December 2025. USAA cannot present an issue that was available at the time of its Garnishee Answer for the first time in its motion to correct error. If this exposes USAA to conflicting obligations, it is a situation of USAA's own making.

Tavitas, Chief Judge.

Bradford, J., and Felix, J., concur.