If you owe money, a creditor can file a lawsuit and obtain a judgment against you that allows him to take funds in your bank account to pay off the debt. However, under federal and New York state laws, some funds are exempt and may never be taken by a creditor.
A judgment is a final decision by a court at the completion of a lawsuit. When a court awards a money judgment, a creditor can seize the funds in a debtor's checking or savings account by presenting the legal papers to the bank. However, before he can take the funds, the bank puts a restraint, also called a "freeze," on the balance. A law has been passed in the state of New York and, as of January 1, 2009, a creditor cannot take all of the money in a debtor's account no matter how much he owes. Certain funds are exempt from a money judgment.
Under New York State and federal laws, a creditor cannot take any portion of exempt funds which include retirement income (such as Supplemental Security Income and Social Security); public assistance; disability benefits; veterans benefits; alimony and child support; and unemployment benefits. Most public and private pensions are exempt from collection. A collector can take up to 10 percent from the wages earned within the past 60 days. A debtor has a right to keep 90 percent of his earnings to pay for his basic needs, such as housing, food and medicine. A debtor can use any exempt funds to pay off debt but a creditor cannot freeze this money.
Bank Depositor's Rights
A bank must send a depositor a notice that the funds are being restrained. While it is not required to notify ahead of time, a bank must mail it within two business days. An exemption claim must be included with it. If the depositor's bank account contains exempt funds, he can file a claim to have the funds released. If a depositor has a joint account holder who does not have a judgment against him, none of the joint depositor's contributions can be taken from the account.
Exempt Income Protection Act
Under the state Exempt Income Protection Act, when placing a freeze, a creditor must leave at least $1,740 in the debtor's bank account. If exempt funds are directly deposited into a bank account, the minimum amount should be at least $2,500. If a debtor has more than $2,500 in exempt funds, he can file an exemption claim to have the remaining funds released. A depositor must contact the bank and the creditor's attorney within 15 days to prevent the creditor from taking the exempt money.