Bank Account Frozen? How to Get Access to Exempt Money

New York statute shields select funds from creditor attachment, even when debt obligations remain unpaid. These legal "exemptions" protect essential income required for basic living needs. Generally, the exemptions apply to the following:

• 90% of any wages earned in the last 60 days
• Government benefits (federal and state)
• Spousal and child support payments[1]
• Limited payroll to cover recent basic necessities

To fully understand exemption rules and maximally protect eligible funds from creditor account freezes, read our accompanying post: "In New York, what personal property is exempt from Creditors? This outlines the complete list of exemptions and the legal process to claim them successfully when funds are at risk.

The Initial Steps When Bank Accounts Are Frozen

Before a creditor can freeze funds in a bank account, they must properly complete several legal forms. First, a restraining notice is served to the bank stating intent to attach the assets for a debt owed. This notice must include two exemption claim forms for the debtor:

1. A bank-addressed form allowing exemptions to block or limit the asset restraint
2. An attorney-addressed form for exemptions to apply directly to the creditor

If a creditor's restraining notice excludes these exemption forms, the bank has no obligation to freeze any funds.

Upon receiving a fully compliant notice, the bank now must forward copies to the debtor within two business days. This communication explains the creditor seeks account funds to satisfy a debt. It also clarifies the account may soon be frozen unless specific documented exemptions apply legally blocking the creditor or limiting restraint amounts. The included exemption forms provide the process to submit a claim.

The Step-by-Step Process for Claiming Exemptions

When a creditor freezes funds in a bank account through a restraining notice, the bank has two business days to forward exemption claim forms to the debtor. To claim exemptions, the debtor must complete and return these forms within 20 days, including any documentation showing the funds are exempt. If the exemption applies to the entire account balance, the creditor has eight days to object, or the restraint is voided. For partial exemptions, the creditor has seven days to calculate the non-exempt amount and instruct the bank to release the remaining funds. If the creditor objects, a court hearing is held within seven days, and a ruling is issued within five days. The debtor's exemption form and documentation constitute prima facie evidence for upholding the exemption. Ultimately, the bank will release or retain funds as directed by the court.

Key Documentation to Support Your Claim

When submitting the exemption forms, include documentation like benefit award letters, pay stubs, pension statements or bank notices. This shows the funds are exempt, and the creditor must release the account within the timeframe outlined above. Carefully gather and provide all relevant proof upfront to avoid delays. If exemptions apply to only part of the money, detail the exact non-exempt amount so the creditor can quickly calculate and unfreeze the rest per the court's expedited levy process.

The Expedited Process if Creditors Dispute Your Exemption

If a creditor disputes the validity of your exemption claim, they must file a formal objection with the court within 8 days and serve you a copy. This triggers an expedited legal process to resolve the dispute. A hearing will occur in 7 days, where you can present the documentation initially submitted with your exemption forms as prima facie evidence of their validity. The judge will issue a ruling within 5 days of the hearing. If the creditor cannot prove the funds are rightfully eligible for attachment, the court upholds your exemption by law. This quick legal resolution aims to limit financial harm from improper account freezes.

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.