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Bank Account Frozen? How to Get Access to Exempt Money

Under New York law, certain funds are exempt from attachment by most creditors.[1] In general, exemptions apply to 90% of your income earned within the last 60 days, state and federal benefits, spousal/child support, and a limited amount of recent payroll to meet basic living needs. For a full discussion of the available exemptions, check our post: In New York, what personal property is exempt from Creditors?

How The Exemption Process Works

When a creditor seeks to freeze or attach assets in a bank account, the creditor must serve a "restraining notice" on the bank. The notice to the bank must be accompanied by an exemption notice and two exemption claim forms, with 1) a pre-addressed form for return to the bank and 2) a pre-addressed form for return to the creditor's attorney. If these forms are not included, the bank does not need to freeze the funds.

After receiving a restraining notice accompanied by the proper forms, the bank has two (2) business days to forward the notice and claim forms to the debtor at his or her last address of record with the bank. The forms explain that the funds in the account are being sought to satisfy a debt, and the funds may be attached or "frozen" unless the debtor is eligible for and claims an exemption.

How Debtors Claim an Exemption

To claim an exemption, a debtor needs to fill out the exemption claim forms and return mail them no more than 20 days after the postmark date on the exemption notice. Copies of any documentation that shows that the funds in the bank account are exempt should be included. Documentation might include benefit award notices, pay stubs, pension statements, or copies of bank notices.

Once an exemption claim form has been submitted, the creditor has eight (8) days to object. Otherwise, the restraining notice is voided, and the funds will (should but sometimes not) be released by the bank.

If the exemption relates only to only a portion of the funds in the account and the creditor agrees with the partial exemption, then the creditor has seven (7) days to calculate the amount of funds to which the exemption applies and send an instruction to the bank to release the remaining funds. A creditor who fails to do this is acting in bad faith and can be subject to penalties for contempt of court.

What Happens When Creditors Object To an Exemption Claim

When a creditor objects to an exemption, it has eight (8) days to file an objection with the court and serve it on the debtor. A hearing will be scheduled within seven (7) days, and the court will issue a ruling within five (5) days after that. The exemption form and any documentation submitted with it are considered to be "prima facie" evidence that the exemption is valid – meaning the court will accept them on their face unless the creditor can supply proof to the contrary.

The bank will release or retain the funds as directed by the court in its ruling.

To see this rule in action, see our prior post: When your bank account is frozen, learn what your exemptions are and how to claim them.


[1] In spousal support, alimony/maintenance, and child support cases, exemptions do not apply. The state has the right to claim otherwise exempt funds to satisfy an outstanding support obligation.