Creditor Freeze your Bank Account? Here's How it Happened.

By Jesse Langel, Esq., LL.M.

| May 21, 2015

Restraining Notices: What Are They & How Do They Work?

Under New York CPLR § 5222, once a creditor has gotten a judgment for a debt, it has the right to use something called a "restraining notice" to freeze assets—including your bank accounts—to "satisfy" the judgment.

Here's how they work. A restraining notice can be sent to the debtor or to anyone the creditor believes is holding assets that belong to the debtor. The notice puts the person who receives it on alert that the assets should not be sold, disposed of, or interfered with. Hiding or disposing of assets that are subject to a restraining notice is contempt of court and is punishable with fines and jail time.

Either the clerk of court or the creditor's lawyer can issue a restraining notice. Generally, the notice may be served personally or by certified mail, although regular mail and electronic service are allowed when the state serves retraining notices related to support and custody obligations.

It should be noted, that restraining notices are not used in the case of wage garnishments to employers.

Restraining Notices Have Specific Requirements

Under New York law, there are very specific requirements for the content of a restraining notice. It needs to include:

The names of all the parties in the case for which the judgment was obtained;
The date and court where judgment was entered;
The amount of the judgment or order and the amount currently due;
The names of all the parties in whose favor judgment was entered;
The names of all the parties against whom judgment was entered;
Specific language explaining that property the debtor owns or has an interest in is being sought to satisfy a debt and that sale, assignment, transfer or interference is forbidden and will be considered a contempt of court;
A copy of the judgment.

Also, as noted in a prior blog, a "Notice to Judgment Debtor or Obligor" must be sent to the judgment debtor within one year of service of the restraining notice.

Restraining Notices Have Specific Exemptions

There are also specific exemptions from the creditor's right to freeze assets using a retraining notice. Unless the debt relates to child support, spousal support, maintenance or alimony, the following types of income are exempt from being frozen:

Supplemental security income (SSI);
Social Security;
Public assistance (welfare);
Spousal support;
Alimony/Maintenance;
Child support;
Unemployment benefits;
Disability benefits;
Workers Compensation benefits;
Public or private pensions;
Veterans benefits;
90% of wages or salary earned in the past 60 days (with some limitations);
Railroad retirement;
Black lung benefits;
Statutory exemptions based on necessity and minimum wage: $3,600.00 (NYC); $3,120.00 in Nassau, Suffolk, and Westchester; $2,832.00 in all other counties in the state. These amounts are automatically protected in your bank account. These were raised based on an increase of minimum wage in 2019.
$3,000.00 protected if any direct deposits from identifiable exempt sources (i.e. social security, unemployment, pension; see below) were made within last 45 days.

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

When a restraining notice is served, a separate notice needs to be sent to the debtor explaining the exemptions and the debtor's right to consult an attorney about a claim of exemption. An exemption notice may not be required in some situations related to repeat restraining notices within a 12-month period. The exemption notice can be personally delivered or mailed. If mailed to a work address, it must be marked "personal and confidential" and must not disclose on the outside of the envelope that it relates to a debt. There are very specific requirements contained in New York CPLR §5222 for the contents and language of the exemption notice.

After a restraining notice has been served, unless an exemption applies, the recipient of the notice should treat the assets covered by the notice as "frozen" until they either receive instructions from the court regarding the liquidation of the assets or receive notice that the judgment has been satisfied or vacated.

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