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/