If a creditor sues an individual for a specific amount of money owed and a judge rules in the creditor's favor, the creditor will be awarded a money judgment. The creditor then has the right to collect that debt, and in some cases the creditor will be allowed to freeze the individual's bank account to remove funds directly.
Exemption Notice and Claim
If a bank account is frozen in the state of New York, the bank must send out proper documentation within two days of freezing the account. The account owner should receive an exemption notice and an exemption claim form. The notice will have information regarding whether or not the account owner is exempt from creditors, as well as information for unfreezing the account. The claim form must be completed and mailed to the bank and creditor attorney within 15 days of receipt to prevent the creditor from taking funds from the frozen account.
Wrongly Frozen Accounts
If an individual's account is wrongly frozen, the bank has no right to charge or collect restraint fees. In cases where such fees show up on the individual's bank statement, the individual should dispute the fees directly with the bank. If you don't receive the proper documentation from your bank within two days of the bank freezing your account, call your bank immediately or report them to the New York State Banking Department at (877) BANK-NYS.
Exempt Income Protection Act 2008
Effective January 1, 2009, the Exempt Income Protection Act provides that certain money held in an individual's bank account is protected from debt collectors. This act ensures that individuals have sufficient funds available to meet their basic daily needs such as rent, food and medicine. The bank cannot freeze the first $1,740 in an individual's bank account regardless of whether the account has exempt funds.
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