This article applies to you if you represented yourself and lost in court. If you were never served with a summons and complaint, if you never appeared in court, or if the judgment creditor has a default judgment against you and your bank account is restrained, click here.
If you tried to represent yourself in court and lost, it’s important to educate yourself on the steps that will happen post-judgment, and to learn what rights you still have to ensure your bank account is either found to be exempt, or to limit the amount seized from your bank account.
The Exempt Income Protection Act of 2008 (EIPA) sets forth requirements imposed on financial institutions when they receive a request from a judgment creditor (debt collector) seeking to restrain, or “freeze” a bank account and withdraw money to pay off a judgment. The EIPA precludes a bank from restraining baseline minimum balances in a “natural person’s” account absent a court order. Specifically, $2,500 is free from restraint “if direct deposit or electronic payments reasonably identifiable as statutorily exempt payments . . . were made to the judgment debtor’s account during the forty-five day period preceding” the restraint (CPLR 5222 [h]). Otherwise, the statute excludes from restraint an amount that corresponds to 90% of 60-days wages under the federal or state minimum wage laws, whichever is greater, to be periodically adjusted—$1,740 as of July 2009 (CPLR 5222 [i]).
In addition to limiting the scope of a restraint, the EIPA adds notification and claim procedures in CPLR 5222-a intended to educate judgment debtors concerning the types of funds that are exempt from restraint or execution in order to facilitate the filing of exemption claims. A judgment creditor restraining a bank account (in anticipation of a sheriff’s execution by levy or court-ordered transfer of assets) must serve the bank with specific forms: two copies of the restraining notice, an exemption notice and two exemption claim forms (CPLR 5222-a [b] ). The restraint is void if the judgment creditor fails to provide these documents to the bank; in that event, the bank “shall not restrain the account” (CPLR 5222-a [b] ), nor can the bank charge fees associated with a restraint (CPLR 5222 [j]).
CPLR 5222-a also imposes an obligation on financial institutions because it compels banks to mail to judgment debtors (the account holders) copies of the exemption notices and exemption claim forms received from judgment creditors (CPLR 5222-a [b] ). This is often the first notice you will receive that your bank account is being “frozen”.
The notice advises the judgment debtor (you) that the bank account is being restrained, describes the categories of funds that are exempt from restraint, and provides information concerning how to seek vacatur of the money judgment if it is by default to avoid a subsequent transfer of the funds to the judgment creditor (CPLR 5222-a [b]  [a]).
The exemption claim form lists specific income sources that are not subject to restraint or execution (such as Social Security benefits, unemployment insurance, child support, veteran’s benefits, etc.) and directs the debtor to check the box next to any applicable exempt funds that have been deposited in the account (CPLR 5222-a [b]  [b]). The debtor is then advised to return one copy of the claim form to the bank and the other to the creditor (or its representative) within 20 days (CPLR 5222-a [b]  [b]). If 25 days have elapsed and the bank has not received an exemption claim form from the judgment debtor, all funds in the account in excess of the applicable statutory minimum remain subject to the restraining notice (CPLR 5222-a [c] ). However, a failure to return the claim form may not be interpreted as a waiver of any exemption the judgment debtor may possess (see CPLR 5222-a [h]).
Upon receipt of an exemption claim form from the account holder, the bank must notify the judgment creditor “forthwith” of the exemption claim and the creditor then has eight days to object (CPLR 5222-a [c] , ). If no objection is lodged, the restraint is lifted with respect to the disputed funds and the monies are released to the judgment debtor (CPLR 5222-a [c] ). To object to an exemption claim, the creditor must timely commence a special proceeding under CPLR 5240, serving papers on both the debtor and the bank before the expiration of the eight-day objection period (CPLR 5222-a [d]). Within seven days of commencement of the proceeding, a hearing is to be held before a court, resulting in issuance of a judicial decision no later than five days after the hearing (CPLR 5222-a [d]). In the meantime, the bank is required to hold the disputed funds for 21 days unless a court order directs otherwise; if 21 days pass and no judicial resolution of the exemption issue is forthcoming, the bank must release the disputed funds to the judgment debtor (CPLR 5222-a [e]). Another subdivision imposes special liability upon judgment creditors that object to exemption claims in bad faith (CPLR 5222-a [g]).
The EIPA did not alter the preexisting provisions in CPLR article 52 permitting the commencement of special proceedings whereby creditors, debtors and “any interested person” can adjudicate disputes over the ownership of income or property (CPLR 5239, 5221), nor did it restrict the power of the court to “make an order denying, limiting, conditioning, regulating, extending or modifying the use of any enforcement procedure” (CPLR 5240).
In summary, it is possible for a judgment debtor to secure release for a “frozen” bank account in an CPLR article 52 special proceeding, which is a judgment debtor’s sole avenue of relief in this type of instance.
In addition, CPLR Article 52 declares that where “the court finds that the judgment creditor disputed the claim of exemption in bad faith . . . , the judgment debtor shall be awarded costs, reasonable attorney fees, actual damages and an amount not to exceed one thousand dollars” (CPLR 5222-a [g] [emphasis added]). So if your judgment creditor seeks to restrain funds in your account that they know are exempt, you can sue your judgment creditor for damages. But a judgment debtor has no right to sue his or her banking institution for failure to follow the strict guidelines of the EIPA. In other words, there is no private cause of action against your bank if they “freeze” your bank account without sending you the required notices.