If you are suffering the extreme consequences of a frozen bank account or levied funds, it is important that you get accurate facts about what you can do to resolve the situation – fast. At Lebedin Kofman LLP, we are consumer advocates that are prepared to take action for you. We have assembled some common questions and answers to assist you to understand the law regarding these critical issues. Call us for more information about your specific case – we can act fast for you.
What is a frozen bank account?
Creditors can get an order to put a restraint on your bank account, and although you can still deposit money into the account, you cannot take any out while the matter is in process.
How does a creditor legally freeze a bank account?
In order to freeze your account, the creditor or debt collector must have a judgment against you, and until you vacate the judgment or agree to settle or pay the debt, the account can be frozen. Without a court order, there is no legal right to freeze your account.
Can a creditor take all the money out of my bank account?
As of January 2009, the Exempt Income Protection Act (EIPA) went into effect, protecting what is termed subsistence funds. Subsistence funds are money in your account from pensions, government benefits and some types of earned income.
What is the criteria to be protected by the EIPA?
Any case filed prior to 1 January 2012, if you have less than $2,500 in your bank account, it cannot be frozen. If your case was filed after 1 January 2012, if your balance is less than $2,625, the funds cannot be frozen in a collection action.
Does the EIPA protect specific funds, such as child support payments or Social Security benefits?
Any benefits that have been direct deposited into you r account, including Social Security benefits, child support payments, SSI, Veteran's benefit payments, spousal support, workers' comp benefits, unemployment insurance, public assistance, railroad retirements benefits or black lung benefits are all protected and cannot be frozen under the EIPA.
How do you vacate a judgment and unfreeze a bank account?
If your account was frozen are exempt benefits, the freeze will be required to be released at once. There was no right to freeze the account, and no need to take the case to court. A simple call to the judgment creditor's lawyer to explain that the frozen funds are exempt should lead to having the judgment vacated. It may be necessary to provide proof, and this can ordinarily be accomplished by faxing or emailing the past 3 months of bank statements.
Should the funds that were frozen be a combination of both exempt and nonexempt funds, recent wages and other income, it is best to take the case to court for resolution. As the judgment will have a significant impact upon your credit score, and the ability to get a loan, it is important that this action is undertaken immediately. Unpaid judgments remain in force and are collectible for up to 20 years in this state. You are protected against repeated efforts to freeze other bank accounts or repeated actions to garnish your wages.
Why didn't the bank inform me before freezing my account?
Under state law, once the bank receives a restrain notice, they are required to immediately freeze your account, and are not required to notify you that this is about to occur.
Why didn't the creditor inform me prior to freezing my account?
A creditor who has a judgment against you has two requirements:
- Notification delivered to you that there has been a lawsuit filed against you.
- Notification delivered to you that they have been successful in getting a judgment against you.
Can the creditor take the money from my account once it has been frozen?
If a New York City Marshal is hired by your creditor, they can now levy funds from your bank account.
Will the creditor then take the money from my account at once?
Cases vary, and there is no set time limit under which the creditor will levy the funds. It could take place within a few months, or in some cases, they don't levy the account at all. Each case is different, but the ability to levy funds can lead to huge losses for you.
What if the account is a joint account?
There are several details that must be evaluated. These include whether the judgment is against only one of the account holders, whether the funds fall under the exempt criteria. These cases are best served by seeking to vacate the judgment in court.
Under Banking Law 678, if it can be established that the judgment is against the other account holder, and that you only had that person on your account for convenience, the entire account can be released. In order to prove this fact, it is necessary to establish that the other party did not have a right to half of the money in your account. This can be proven by showing that the other party did not have any privileges to withdraw money from your account, and did not have an ATM part. If you cannot prove these facts, then you can recover ½ of the money in the account if the judgment is against the other party. If the judgment creditor can prove that the money actually belongs to the other person and no you, the creditor does not have the right to take more than ½ of the money in the count.
Contact Lebedin Kofman LLP immediately if your bank account has been frozen. Based upon the facts and the various strategies that could be employed, we can take action to help you get the judgment vacated and funds released from the restraint.