When you’ve got a judgment against you, collection gets scary. For New Yorkers, there’s some relief.
When people call me for help with their bill problems it’s usually because they’re scared of a judgment.
The fear doesn’t stem from the actual lawsuit from a creditor, but rather the efforts that creditor can take after the lawsuit is completed.
Wage garnishments, bank account freezes and the prospect of being penniless are powerful motivators when it comes to clearing up bill problems.
Luckily, the law’s on your side this time.
New York Exempt Income Protection Act
Once upon a time, a creditor with a judgment against you could lock up your entire bank account as a way of enforcing the judgment. A little known New York law called the Exempt Income Protection Act prevents that from happening.
The Exempt Income Protection Act prevents judgment creditors from taking certain funds in bank accounts to satisfy money judgments. It’s not a cure-all, but it does take some of the heat off you as you plan your next move for getting out of debt.
Under the EIPA, the following funds cannot be frozen:
- The first $1,740 in any bank account;
- The first $2,500 in any bank account received within 45 days from the following sources:
- Social Security benefits
- Supplemental security income (SSI)
- Disability benefits
- Child support payments
- Worker’s Compensation benefits
- Veterans Administration benefits
- Railroad Retirement benefits
- Public or private pension payments
- Unemployment benefits
- Public assistance
If your account contains less than the amount you can exempt, then the restraining notice sent by the creditor to the bank is considered void – in other words, the bank gets to rip it up and ignore it.
Beware The Exceptions
Don’t jump for joy yet – the exemptions have exceptions. If the State of New York, or any of its agencies or municipal corporations, is the judgment creditor then all of your funds can be frozen. In addition, if the debt being enforced is for child support, spousal support, maintenance or alimony then the exemption doesn’t apply either.
For that reason, it’s important to take a look at the debt collection lawsuit as well as the judgment carefully.
The EIPA Doesn’t Solve Your Problem
You probably can’t live off the amount of money excepted under the EIPA, so it’s not going to solve the problem of having a judgment against you.
It doesn’t prevent a judgment creditor from taking a portion of your income to pay off the debt.
The interest on the judgment continues to pile up.
And if you’re like most of my clients, this isn’t the only debt you’ve got.
With that in mind, remember that the EIPA is designed to give you some breathing room so you can take stock of your situation and figure out the best course of action to work through your bill problems. For some people, negotiating with the creditor is the right solution. For others, bankruptcy makes sense. And for a very few, allowing the creditor to collect on the judgment through a wage garnishment is going to cause the least financial pain.
Regardless, the EIPA gives you the opportunity to sit down with a lawyer and map out a course of action.
Image credit: rofltosh
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