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Which Creditor has Priority to Take Your Personal Property? New York Law Simplified.

Which creditor gets first crack at your personal property? The answer to that is the scope of this blog post.

In our practice, most of our work involves defending against wage garnishments and bank restraints. But of course it’s useful to know all applicable laws when different types of creditors are pursuing different types of assets. That’s where New York CPLR § 5234 comes in. This statute, however, does not address lien priority against real estate. That law is § 5203 as discussed here.

New York CPLR § 5234 lines up creditors to determine priority in a debtor’s personal property. It addresses the timing issues of taking certain action (delivery of an execution v. levy) between different types of creditors (execution creditors v. judgment creditors). The first part of the statute is a straightforward rule as to how proceeds are distributed after the property is seized.

Here’s a summary of the law:

CPLR Section 5234: Distribution of Proceeds of Personal Property & Priorities

1. Distribution of Proceeds of Personal Property

Once a property seizure happens, two things must occur before the proceeds of the personal property or debt acquired by a receiver or a sheriff (or other officer authorized to enforce the judgment) are distributed to the judgment creditor:

i. payments and fees are deducted

ii. expenses and any taxes are levied upon sale, delivery, transfer or payment

Distribution of proceeds can not be made until fifteen (15) days after service of the execution except upon order of the court and any excess is paid to the judgment debtor.

2. Priority Among Execution Creditors

What happens when more than one creditor is trying to claim the same debtor’s assets? Generally speaking, they are satisfied out of the proceeds of personal property or debt levied upon by the officer or by the support collection unit in the order in which they were delivered. However, executions for child support have priority over any other assignment, levy or process.

When two or more executions or attachment orders are issued against the same judgment debtor or obligor and delivered to different enforcement officers, the proceeds are applied in this order:

i. in satisfaction of the execution or order of attachment delivered to the officer who levied

ii. in satisfaction of the executions or orders of attachment delivered to those of the other officers who, before the proceeds are distributed, make a demand upon the officer who levied, in the order of such demands

Note: This presumes that the personal property or debt is levied upon within the jurisdiction of all of the officers.

Again, executions for child support have priority over any other assignment, levy or process. However, when there is more than one past-due child support order, the proceeds are applied to the orders in proportion to the amount each order's claim bears to the combined total.

An execution or order of attachment returned by an officer before a levy or delivered to him after the proceeds of the levy have been distributed can not be satisfied out of those proceeds.

3. Priority of Other Judgment Creditors

Where personal property or debt has been ordered, delivered, transferred or paid (or a receiver or receivership has been ordered), and the order is filed before the property or debt is levied upon, then the rights of the judgment creditor who secured the order are superior to those of the judgment creditor entitled to the proceeds of the levy.

Where two or more such orders affecting the same interest in personal property or debt are filed, the proceeds of the property or debt must be applied in the order of filing. Where delivery, transfer or payment is not completed within sixty (60) days after an order is filed, the judgment creditor who secured the order will be divested of priority. However, a 60-day extension may be ordered.

If you have questions about distribution of proceeds of personal property or who gets it first, contact an experienced attorney to make sure you understand your rights.