LR Credit 21 and Mel Harris firm Fail to Show Compliance with Exemption Law

Judge Ciaffa of New York District Court, Nassau County denies and dismisses Mel Harris' attempt to force a debtor's relinquishment of funds contained in a joint bank account. The cited defect was Mel Harris' failure to prove compliance with New York's recent Exempt Income Protection Act with particular emphasis on CPLR § 5222-a. The assignee creditor was LR Credit 21, LLC.

In New York, you have a set of procedural rights to assert protections over "exempt" monies (i.e. social security, recent income, unemployment, child support, etc.) contained in bank accounts before a judgment creditor takes it.

In LR Credit 21, LLC v. Burnett,[1] after a restraining notice[2] had been served on Chase Bank, and after it expired (one year), LR Credit's counsel, Mel S. Harris & Associates, served the Suffolk County Sheriff an "execution" to re-activate a restraint for 90 days to allow Mel Harris to serve a turnover petition to compel the judgment debtor to "turn over" all money contained in a joint bank account that would satisfy (pay off) the judgment at issue.

But not so fast, held Judge Ciaffa. Mel Harris was required to plead and prove compliance with CPLR § 5222-a that requires the bank to receive and send to the judgment debtor a copy of the exemption notice and two exemption claim forms by first class mail to the judgment debtor's last-known address.

Firstly, the court held, the exemption-notice protections afforded to judgment debtors involving restraining notices also apply to turnover proceedings involving Sheriff executions. This means that § 5222-a undoubtedly applies in this case.

Here, Mel Harris' turnover papers neither pleaded nor proved compliance with CPLR § 5222-a. The court ruled "[i]n the absence of proof that the sheriff provided an exemption notice and exemption claim forms to the bank, together with its execution notice, the execution is "void" as a matter of law. CPLR 5222–a(b)(2). The only way for the court to be satisfied that a judgment debtor received her right to those protections is if creditor's counsel swears to it in an affirmation.

In sum, two duties were not met in this case: 1) Sheriff's duty to show that the notices were sent to the bank; and 2) Bank's duty to show it sent those notices to the judgment debtor. The court thus ruled that the execution was deemed void and any restraint be lifted without costs to the debtor.



[1] LR Credit 21, LLC v Burnett, 40 Misc 3d 854, 855 [NY Dist Ct 2013, June 24, 2013].

[2] A legal document that prevents the bank from allowing the transfer of any of the judgment debtor's assets, including to the debtor herself.

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