New York City Debt Collection Defense Attorney

New York Banks Freeze Double the Judgment Amount. Why?

Short answer: To ensure that there is an adequate sum of money to cover the judgment amount, the expenses of collection, and the continually accruing interest while allowing the judgment debtor access to excess monies.[1]

Understanding Why NY Banks Freeze Double the Judgment Amount

  1. Interest: Judgments in New York accrue interest at a statutory rate from the date they are entered until they are paid in full. Freezing double the judgment amount ensures that these accrued interest costs are covered.
  2. Fees and Costs: There may be additional costs related to the enforcement of the judgment, including attorneys' fees, court costs, and sheriff's fees. These additional amounts can be recovered from the debtor, so the banks freeze an amount sufficient to cover them.
  3. Protection Against Errors: Freezing a larger amount provides a buffer in case of any miscalculations or unforeseen circumstances.

Doubling the judgment amount seems fair when viewed in the context of our consumer credit practice, where we see some judgments having been entered in the 1990s with statutory interest accruing since.

The bank account becomes restrained ("frozen") through a document called a restraining notice, which can be signed by the judgment creditor's attorney. The restraining notice serves as a type of injunction prohibiting the transfer of the judgment debtor's property. When served on a bank, the bank is called a "garnishee." When served on that garnishee bank, the injunctive effect of the restraining notice continues for one year or until such time as the judgment is satisfied or vacated, whichever occurs first, and extends to property both "then in and thereafter coming into the possession or custody of the garnishee." CPLR §5222. A judgment creditor serving a restraining notice ordinarily is required to take further steps in enforcing its judgment, such as an execution or levy upon the judgment debtor's property, in order to prevent the intervening rights of third parties from taking precedence.

Also, the restraining notice does not confer priority upon the judgment creditor in the form of a lien on the judgment debtor's property. The restraining notice does not establish priority between competing claims for the funds.

Shielding Your Money: Exemptions from Frozen Bank Accounts in New York

While judgment creditors may initially freeze double the judgment amount in your bank account, there's a silver lining: certain funds are exempt from this freeze. Understanding these exemptions empowers you to protect your hard-earned money and ensure access to essential resources.

Examples of Exempt Funds:

  • Public Benefits: Social Security benefits, Supplemental Security Income (SSI), and Temporary Assistance for Needy Families (TANF) payments are all exempt from bank account freezes in New York.
  • Veterans Benefits: Disability benefits and retirement payments received by veterans and their dependents are also protected.
  • Minimum Wage Earnings: A portion of your wages, based on the current minimum wage, cannot be frozen. This amount varies depending on your location within New York.
  • Retirement Accounts: Funds in qualified retirement accounts, such as IRAs and 401(k)s, are typically exempt.
  • Certain Workers' Compensation Benefits: Awards for permanent disability or death are generally not subject to freeze.

Claiming Your Exemptions:

To protect exempt funds, you need to act quickly. Once you receive a restraining notice, promptly contact the bank and provide them with documentation verifying the exempt nature of your funds. This documentation may include:

  • Award letters from the benefits programs
  • Pay stubs showing your minimum wage earnings
  • Account statements for your retirement accounts
  • Documentation of your workers' compensation award

Understanding and claiming your exemptions can shield your essential funds from being frozen in a bank account freeze situation. Remember, taking proactive steps and seeking legal guidance when needed can help you navigate this challenging situation effectively.

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[1] Aspen Industries, Inc. v. Marine Midland Bank, 74 A.D.2d 59.