Money JudgmentsHow a money judgment is enforced and what you can do.
What is a money judgment?
A creditor gets a judgment when it wins a lawsuit against you.
A judgment is a piece of paper issued by the Court stating that the creditor (or other plaintiff) has won the lawsuit and is entitled to a certain amount of money
Once the creditor has a judgment against you for a certain amount of money, the creditor can employ a host of methods to collect the money that are unavailable without a judgment
The judgment must be “entered” -- that is, filed with the court clerk
Filing usually happens a day or two after the judge issues the judgment
After the judgment is filed, the court or the creditor’s attorney should send you a copy
How Did It Happen?
A creditor can win their case and be awarded:
Money you owe Interest on the debt Court Costs Attorney Fees
Your creditor will get a judgment against you in any of the following situations:
You don’t respond to the summons by mailing the creditor’s attorney an “answer”
You don’t respond to motion papers that you receive in the mail by sending a written response and showing up in court
You do show up in court but you lose your case
How do they get the money?
There are four ways a judgment can be collected:
1. Garnishment2. Bank Accounts3. Personal
Property4. Your Home
A Creditor can:
Take money from your pay
Freeze your bank account
Demand personal belongings
Get money when you sell your home
Garnishment
This means that money will be taken out of your paycheck to pay back the judgment amount
You will get a notice stating that an “income execution” will be served on your employer unless you start paying the judgment amount in installments to the Sheriff
Your income may normally be garnished at 10% of your gross (pre-tax) income
Limitations of Garnishment
Your weekly income after tax cannot be reduced below 30 times the minimum wage (currently $217.50 weekly)
The “income execution” notice will also explain that you have the right to challenge the income execution
Disposable Income This is the amount of money you take home in your pay after deductions are made for taxes, Social Security and unemployment insurance.
Gross Income Is the amount of money you make before any of the above deductions are taken.
Garnishment is based on your Disposable Income.Social Security and other benefits are exempt from collection and cannot be garnished.
How Much Can Be Taken Per Week?
Disposable Income < $217.50 per Week
Disposable Income > $217.50 < $290
Disposable Income > $290
All of your earned income is exempt from debt collection. Your wages CANNOT be garnished.
The creditor may garnish the LESSER of:
Whatever you earn above $217.50 per week;
- OR -
10% of your gross income.The amount you earn above $217.50 is usually less than 10% of your gross income.
The creditor may garnish the LESSER of:
10% of your gross income;
- OR -
25% of your disposable income.
10% of your gross income is usually less than 25% of your disposable income.
Multiple Garnishments You can be garnished for a private debt even if you are already
being garnished for child and/or spousal support, but only up to
25% of your disposable income
You can be garnished for multiple private debts
generally, the first creditor takes the maximum amount
possible the second creditor must wait until you finish paying the first
creditor only then can the second creditor garnish your wages
How Does Garnishment Work? All wage garnishments for private debts begin with a
debt collection lawsuit
The creditor uses a judgment against you in order to garnish your wages
The creditor will send the wage garnishment notice to the Sheriff or Marshal
This notice is called an "income execution"
Executing the Garnishment The Sheriff or Marshal must serve you with a copy of the income execution within
20 days
Once you are served with the income execution, you have 20 days to call the
Sheriff/Marshal to arrange a voluntary payment plan
If you do not contact the Sheriff or Marshal within 20 days, they will serve the
income execution on your employer
Your employer will begin sending 10% of your gross earnings to the Sheriff or
Marshal
The Sheriff/Marshal must send you a periodic accounting stating:
1. how much you have paid
2. how those payments have been applied, and
3. how much you have left to pay
How to Stop Garnishment
Going to Court to have the default Judgment vacated can:
stop the garnishment
remove/prevent the judgment from showing on your credit report
allow you to file a claim to be repaid money already garnished
You must have valid grounds to have the judgment vacated
If you do not wish to go to court, then you can always contact the Sherriff/Marshal or your judgment creditor in order to make voluntary payment arrangements
Employer Response to Garnishment
Your employer cannot fire you the first time you are garnished
Your employer may be able to fire you if you have a second garnishment
If You Can’t Afford It
You have the right to go to court and ask the court to modify the
amount of your garnishment
go to the court with a copy of the income execution and tell the clerk that you want to file an "order to show cause" to modify the wage garnishment
be prepared to explain to the court why the current garnishment amount is too high
bring proof of your income, rent, bills, and monthly expenses in order to prove to the judge that you should be garnished at a lower rate
be prepared to show that the current rate of garnishment prevents you from paying for necessities, like rent, food, utilities, or necessary medical care
Restraining Notice and Levy
The attorney for the judgment creditor may serve a restraining notice on you or other persons. The purpose of a restraining notice is to prevent you or any person from selling or transferring any property that the creditor may seize in order to satisfy the judgment.
Your Bank Account
Neither the bank nor the creditor is required to give notice before
freezing your bank account
the creditor must notify you if it has filed a lawsuit against you the creditor must notify you if it has won a judgment against you you have not received proper notice under the law if your first
notice of a court case is a frozen bank account
The bank will send you a letter notifying you once the account is frozen
the letter will contain information to help you declare exempt funds
and allow you to demand an immediate release on your funds you may need to contact the creditor’s attorney to demand a
release you may want to go to Court to vacate the default judgment
What Your Bank DoesIf your bank is served with a restraining notice, it will put a freeze on your account for double the amount of the judgment plus fees.
Certain income deposited into the account, such as public
assistance and social security income or other benefits, and 90% of
your earned income from a job, is exempt from being used to
execute a judgment
If you do not claim an exemption, the attorney may serve through
the Sheriff (or Marshal) a “levy” commanding the bank to transfer
the restrained funds to the attorney to be applied to the judgment
If You Receive a Restraining Notice Your bank must send you the Exemption Notice and Exemption
Claim Form within two (2) business days of freezing your account
Do not ignore it
If you believe that the judgment creditor may seize or has already seized any exempt funds immediately contact the judgment creditor’s attorney with proof that the funds are exempt
Exemption Claim Form When serving a restraining notice or levy on your bank, the creditor’s attorney is required to provide the bank a copy of an “exemption claim form” that the bank must forward to you so that you may assert a claim that your bank account contains exempt funds
You will receive this notice after the account is frozen
You must complete the Form and mail it to your bank and the creditor’s attorney within 15 days to prevent the creditor from taking your money.
If Your Account Contains Exempt Funds If your account contains exempt funds, such as public benefits or
retirement payments or money earned from a job within the last 60 days, you should fill the form out and return it promptly to the bank and attorney claiming the exemption
This may result in release of the funds, or the attorney may ask the court to hold a hearing to decide whether the funds are exempt from collection
Example of Exempt Funds Social Security Supplemental Security Income
(SSI) Veterans Benefits
Disability Workers Compensation Unemployment Insurance
Public Assistance Railroad Retirement Benefits Black Lung Benefits
When Your Bank Account is Frozen You can put money into your account but there is a limit as to how much
you can withdraw from it
money you deposit may be frozen and then unavailable to you
you may want to stop depositing money into the account after it is
frozen
The account may show a negative balance because the creditor will
generally put a hold on it for twice the amount of the judgment against
you
you do not actually owe all of this money to the judgment or creditor
the amount you owe is the amount of the judgment
Your account is frozen as means to pressure you to pay the creditor
Limits on Frozen Accounts Your bank account cannot be frozen if the balance is
less than:
$2,625 - for cases filed after January 1, 2012 --
$2,500 - for cases filed before January 1, 2012
exemption only applies if there are direct deposited benefits such as social security in the account
Accounts containing less than $1,740 cannot be frozen
Exempt Income Protection Act of 2008
Some money held in bank accounts is protected to ensure that consumers have sufficient funds available to meet their basic needs, such as rent, food, and medicine.
Complete and return the Exemption Claim Forms
Proving Exempt Income Notify the attorney that all the funds in your bank account are exempt from debt
collection
demand an immediate release of your account
If the attorney asks you to fax or mail proof of your exempt income
you can send up to three months of bank statements as proof redact (black out or remove) information from your bank statements to protect
your privacy the attorney only needs to see deposits, not things you paid out
Do not be surprised if the attorney delays taking action, makes excuses or stalls on
releasing your funds
Even if your funds are exempt, you should still go to Court to vacate the default
judgment if possible
Direct Deposits If you get direct deposit of the exempt funds already referenced in this presentation, your bank must leave at least $2,500 in the account.
If your exempt funds are not directly deposited into your account, your bank may not be aware that you have exempt funds in the account and might freeze funds you have over $1,740.
Manual Deposit
Joint Accounts Joint bank accounts can be frozen even if there is a
judgment against only one of the account holders
If the account contains only exempt income you should work with the bank and contact the attorney to obtain release of the exempt funds
Examples of protected income in a joint account would be:
a parent's pension
your child's Supplemental Security Income (SSI)
Judgment Against Someone Else
The best way to unfreeze your money, is to have the holder who has the judgment
file with the Court to vacate it
If vacating the judgment is not possible, you can go to Court to obtain release of your
account under Banking Law 678:
in order for your entire account to be released, you must prove that you added
the other person to your account for convenience only
you must prove that you did not intend to give the joint account holder the right
to own half of the money in the account
you can show that the joint account is for your convenience only by
demonstrating that you are the only person who used the account
show that the other person did not have an ATM card or withdrawal privileges
provide other information to show that the account actually belongs to you alone
ask your bank to write a letter stating that the joint account was for purposes of
convenience only
Recovering Half of the Account
If you cannot prove that the joint account is for convenience only, then you can recover half of the money in the account.
under Banking Law 675, the judgment creditor cannot have more than half the money in the account unless it proves that the money belongs to the other person, and not to you
the law presumes that half the money in the account belongs to you and half belongs to the other person
Taking Your Money A creditor or debt collector can serve a levy through the Sherriff to obtain funds from your account.
There is no set time limit
some judgment creditors try to seize funds right away, and others never actually take funds at all
most judgment creditors will wait at least a few weeks before attempting to levy your bank account
You can often get your money back if you go to Court
file to vacate the default judgment in the filing, you can ask the court to order the creditor or debt
collector to return your funds
25 Days Notice
A levy can't happen "right away" or on less than 25-days notice.
The bank must wait 25 days for the return of the Exemption Claim Forms.
Exceptions to the Exempt Income Protection Act
Certain types of creditors may be able to freeze your bank account even if the account contains exempt funds.
Examples:
student loan debts child support arrears
Garnishment and Your Bank Account
It is generally not possible for a creditor to garnish your pay and freeze your bank account at the same time
If you are already being garnished at the maximum amount, the rest of your wages should be exempt from debt collection, even if they are deposited into your bank account
IMPORTANT!!!
90% of income earned within the last 60 days is exempt from debt collection.
If you have a frozen bank account, and all the money in the account is from recent paychecks, odds are it is all exempt from debt collection.
The Best Protection
The best way to protect your exempt benefits is to sign up for direct deposit and keep your bank balance below $2,500
The best way to protect your earned income is to keep your bank balance below $1,740
Retirement Funds
Retirement funds are exempt from debt collection. These would include:
public and private pensions
retirement savings accounts: 401(k) 403(b) IRAs All of the principal and 90% of the payments from a
private trust
Being “Judgment-Proof” If your income consists only of exempt funds and you have no assets, you could be
considered "judgment proof."
Being “judgment proof” means that your creditors cannot collect money
from you -- even if they have a judgment -- because all of your income and
property is exempt
It is important to understand that a court can still enter a judgment against you,
even if you are considered "judgment proof."
You will not have to pay the judgment so long as your income remains
exempt from collection
If your situation changes (for example, if you return to paid employment or
win the lottery) you will have to pay the judgment from your non-exempt
funds
Seizure of Personal Property
A judgment creditor may use the Sheriff to seize personal property from you that is not exempt.
Exempt property generally includes:
household goods one television one radio personal items like your wedding ring or a watch, one car provided your equity in the car is less than $4,000
If you can show that a computer or a car are indispensable to your work, they may be exempt as “tools of the trade.”
Seizure of Personal Property Limitations
Your car can be seized only if your equity in it is greater than $4,000.
If you still owe money on the car, it is probably completely exempt from debt collection
For example, if your car is worth $10,000 but you still owe $8,000, your car would be completely exempt from debt collection
Cars that have been equipped for use by people with disabilities are exempt up to $10,000
Non-Exempt Personal PropertyIt is rare for a debt collector to actually seize personal property.
Personal Property that a creditor might consider seizing would be:
expensive jewelry valuable paintings high-end furnishings luxury goods
Low-income individuals and the average consumer generally do not
own items vulnerable to seizure, thus this is often an empty threat.
Items must be worthy of fetching a good price at auction before a
creditor will consider this.
Lien on Your Home
The filing of a judgment with the clerk in the county where the real
property is located automatically places a lien on your home for 10
years. If you refinance or sell your home you must satisfy the lien
by paying off the debt.
Enforcing Judgments in Different States
Sometimes a creditor obtains a judgment against you in a state where you do not live. This can happen if you have moved since the debt was incurred, if you signed a contract in another state, or if the contract specified another state for suing to enforce the contract and you were not able to get the location changed. Or, you may own property or have assets outside the state where the judgment was obtained. The creditor can go into court in the state where you now live or have assets and register the original out-of-state judgment. This means the creditor now has the right to use all the judgment remedies available in the state where you now live or have assets (the second state).
IMPORTANTA creditor who places a judgment lien on your property can only do so according to the rules for judgment liens in your state. It’s not unusual for creditors to make mistakes, which may make the lien unenforceable. You might have a defense against a creditor’s attempt to execute on a lien because it is too old or because it was not properly handled. You would be able to fight a lien that was placed inappropriately or too long ago. Consult with an attorney.
Tax RefundsTax refunds are not exempt from debt collection.
The Best ResolutionProtecting your exempt income and avoiding garnishment of your wages may help you keep your money out of a creditor’s hands but your best bet is to have the default judgment vacated.
Call the CLARO Hotline: (716)828-8432
Need Help with a Money Judgment?
Thank You!
This concludes the slideshow Money Judgments. Visit CLARO online at http://clarobuffalo.org/
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