No Turnover Ordered Where Cavalry Portfolio Services Failed to Comply With Bank Freeze Procedure

By: Robert J. Nahoum

A man in suit and tie with his arms crossed.

A debt collector with a New York state court judgment has a powerful tool at its disposal to enforce the judgment called a “restraining noticeâ€.  A restraining notice is a judgment enforcement device that restrains anyone holding property of the judgment debtor from releasing that property.  The most common example of a restraining notice is where the judgment creditor serves a bank.  If the bank is holding money belonging to the judgment debtor, the restraining notice precludes the bank from releasing those funds.  To collect the frozen money, the debt collector then must make a motion to the court to “turnover†the restrained funds.

In a recent case, infamous debt buyer Cavalry Portfolio Services lost one such turnover motion for failing to comply with basic and routine restraining notice procedures.  In this case, Cavalry sued the consumer in the District Court of Nassau County First District for an old Citibank Credit Card it bought.  Cavalry obtained a judgment against the defendant and in its efforts to enforce the judgment, froze a bank account jointly held by the defendant and another person who was not part of the suit.  Cavalry filed a motion for turnover but Judge Michael A. Ciaffa denied the motion for failure to follow basic procedures.

Under the Exempt Income Protection Act (EIPA), when a bank account is frozen, the judgment debtor is supposed to receive a notice of the restraint and an exemption claim form, mailed by the bank.  The form is designed to be a self-explanatory, self-help measure which lists certain funds as exempt from the bank freeze.  If the judgment debtor has exempt funds in the account, he or she must notify the bank and the debt collector by completing the exemption claim form and mail it back to the debt collector’s attorney and the bank.

In this case, Judge Ciaffa found that “due to petitioner’s failure to plead and prove that it provided [the bank] with the notices and claim forms described in CPLR 5222-a(b)(1), as required by the Exempt Income Protection Act, […] the petition is fatally deficient, petitioner’s purported restraint upon respondents’ bank account must be deemed null and void.â€

Sloppy debt collection work by Cavalry and its attorneys proved to be a win for the consumer.

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.  With office located in the Bronx, Brooklyn and Rockland County, the Law Offices of Robert J. Nahoum defends consumers in debt collection cases throughout the Tristate area including New Jersey.

The Law Offices of Robert J. Nahoum, P.C
(845) 232-0202

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