The lessons in this case are 1) be aware that some sources of money are ALWAYS exempt from the reach of creditor judgments; and 2) quickly claim your exemptions with supporting documentation.
The following sources of money are always exempt (unreachable by creditors to satisfy a money judgment):
- Social security;
- Social security disability;
- Supplemental security income;
- Public assistance (welfare);
- Income earned while receiving SSI or public assistance;
- Veterans benefits;
- Unemployment insurance;
- Payments from pensions and retirement accounts;
- Disability benefits;
- Income earned in the last 60 days (90% of which is exempt);
- Worker's compensation benefits;
- Child support;
- Spousal support or maintenance (alimony);
- Railroad retirement;
- Black Lung benefits;
The state has an interest in protecting its citizens' basic means of survival. If your bank account has been frozen by a creditor, claim the above exemptions. The procedure for doing so is set forth in New York CPLR § 5222-a, aptly titled, "Service of notices and forms and procedure for claim of exemption." I outlined the procedure at the end of this blog entry. Call me for further help!
Basically sending an "exemption claim form" to the bank or lawyer with a checkmark next to the applicable exemption triggers an obligation on the part of the creditor's lawyer to either release the account or properly object to your exemption claim through a formal "motion."
The most frequently applicable exemption I see is the "income earned in the last 60 days (90% of which is exempt." So many people live paycheck to paycheck and rarely do their bank accounts contain any other income other than their last 60 days of wages. So if your bank account is suddenly frozen, don't panic! Call me and let's fill out, fax, and overnight the supporting proof to the bank and the opposing lawyer!
In a case reported in last week's New York Law Journal, Midland Funding, LLC DBA in New York as Midland Funding of Delaware, LLC v. April Singleton, CV 013259, 2010 (1st Dist. Nassau, Decided December 1, 2011), the procedure was nicely set out.
What the debtor did wrong in that case was only produce pay stubs without bank account statements that would show whether those wages were actually deposited into the frozen bank account. Had the debtor supply those bank statements, Midland Funding, LLC may have not challenged the debtor's claim that all money was income earned within the last 60 days. In fact, in response to an information subpoena, Sovereign Bank informed Midland that other deposits had been made into that account. Based on this information, Midland had a reasonable basis to challenge the exemption.
After receiving the debtor's claim exemption form (with only pay stubs and no bank statements), Midland properly objected to those claimed exemptions. The court ordered a hearing to determine the exact contents of that bank account.
In short, the exemption claim process (in New York) works as follows:
- Get the exemption claim forms. The bank is supposed to mail you copies within two (2) days after it receives the creditor's lawyer's restraining notice (document that freezes your account).
- Send to the creditor's lawyer and the bank copies of the exemption claim form with supporting proof within twenty (20) days of the post-marked date on the bank's envelope that the forms were supposed to arrive in.
- If you supply good proof that the money is exempt, the attorneys must release the account with seven (7) days; or, alternatively, the attorneys must object to the claimed exemptions within eight (8) days.
- The creditor's lawyer must have a "reasonable belief" that the funds at issue are not entirely exempt as claimed. If the debtor fails to provide proof (i.e., bank statements, pay stubs, pension statements, unemployment benefit statements award letter, copies of checks, etc.) supporting the exemption, the creditor's lawyer may cite to that lack of proof to establish an absence of such proof. If the papers are irrefutable, a judge can issue a determination without an evidentiary hearing. If the debtor fails to 1) supply good proof; and/or 2) oppose the creditor's objection, then a hearing will be set.
- The court is required to determine the character of the bank account within 5 days of the hearing.
I hope this information is useful. But call me anyway if your account has been restrained. A free consultation will be well worth it for you! (646) 290-5600 – Jesse Langel, Esq.