Can a Debt Collector Restrain My Entire Bank Account?

By Robert J. Nahoum

 

THE PROBLEM:

You have just been notified by your bank that your account has been frozen by a debt collector who was awarded a judgment against you in a lawsuit on an old debt.  You just got paid and you need that money to pay the rent, the utility, the groceries, your car payment, your kids’ school trip etc…

What can they keep and what can’t they keep?

THE RULES:

Under New York law, certain money in a judgment debtor’s bank account cannot be taken (or as it is called in the debt collection business “exempt”).

Under the New York Exempt Income Protection Act (“EIPA”) the following assets are exempt from levy

• social security benefits;
• pensions benefits;
• public assistance;
• workers compensation;
• unemployment insurance;
• child support, and spousal support or maintenance;
• 90 percent of earnings deposited into a consumers’ bank account within 60 days prior to the date the bank receives the restraining notice.

To make certain that none of these exemptions are overlooked, the EIPA precludes certain funds from being frozen including:

• the first $2,625 in a judgment debtor’s bank which are “reasonably identifiable” as “statutorily exempt” AND that were made electronically or by direct deposit during the 45-day period prior to service of a restraining notice; or
• where deposits are not made by direct deposit, the first $1,920 of such deposit.

So, what is happening here is that, because “90 percent of earnings deposited into a consumer’s bank account within 60 days prior to the date the bank receives the restraining notice” is exempt, the banks are not allowed to freeze the first $2,625 deposited electronically or by direct deposit from the judgment debtor’s employer or the first $1,920 if deposited another way.  The law presumes that the $2,625 (or the $1,920 as the case may be) is exempt wages and so it cannot be frozen.

WHAT TO DO:

As an added protection to ensure that exempt assets are not frozen, the law requires that when the debt collector sends a restraining notice, it must also send a notice listing the categories of exempt assets and an “Exemption Claim Form”.  If you have exempt assets, you must fill out the exemption claim form and send it to the bank as well as to the debt collector’s attorney within 20 days.

Beware; a frozen bank account is a symptom of a much bigger problem.  You have a debt collector hot on your trail and he will stop at nothing until he is paid.  You as the consumer have many consumer protection tools available to you and should never lie down and make it easier for the debt collector.  Make him prove his case through competent, admissible evidence.  Make him comply with debt collection exemptions.  Make him comply with the FDCPA and debt collection laws.  If he fails to adhere to these laws SUE HIM!  You may be entitled actual damages, $1,000 in statutory damages and your lawyers’ fees.

If you need help settling or defending a debt collection law suit, stopping harassing debt collectors or suing a debt collector, contact us today to see what we can do for you.

The Law Offices of Robert J. Nahoum, P.C
(845) 232-0202
www.nahoumlaw.com
[email protected]