What is the Exempt Income Protection Act (EIPA)?
In January of 2009, the EIPA Law went into effect that protected subsistence funds in one’s bank account from creditors and debt collectors.
What are subsistence funds?
Subsistence funds are funds obtained in one’s bank account by pensions, government benefits and some earned income.
Are there any standards needed in order to be protected by the EIPA law?
For cases filed before January 1, 2012- your bank account cannot be frozen if the balance is less than $2,500.
For cases filed after January 1, 2012- your bank account cannot be frozen if the balance is less than $2,625.
Does the EIPA protect funds such as child support, or social security?
Directly deposited exempted benefits such as social security, child support, SSI, Veterans Benefits, Disability, Spousal Maintenance, Workers Compensation, Unemployment insurance, Public Assistance, Railroad Retirement Benefits and Black Lung benefits, are indeed protected by the EIPA.
What if my bank account does not include subsistence funds and/or directly deposited exempted benefits?
All other accounts protected by the EIPA have to contain a balance of more than $1,740 in order to be frozen by a creditor or debt collector.
What is a frozen bank account?
When a creditor or debt collector wants to pressure someone into paying their debt, they have the right to put a restraint on your bank account meaning that although you can deposit money into it, you are unable to withdraw money out of it.
Why are creditors and/or debt collectors allowed to freeze my bank account?
As long as creditors and/or debt collectors obtain a court judgment against you, they are allowed to restrain your bank account until you can either 1. Vacate the judgment or 2. Agree to settle/pay off your debt. A creditor and/or debt collector has no right to freeze your bank account if they do not have a court judgment against you.
How can I vacate a judgment against me in order to unfreeze my bank account?
Vacating the judgment against you means that you have been able to “erase” the judgment. Your bank account is released immediately once the judgment is vacated. A lawyer is not needed to vacate a bank account, but it is encouraged to go to court in order to lift the freeze.
Is it absolutely necessary to go to court in order to vacate the judgment?
Depending on the funds in your bank account, you may or may not need to go to court.
If the funds in your frozen bank account only include exempt benefits, the freeze must be released immediately. Going court is not necessary because then a judgment creditor does not have the right to hold onto your account. In order to release your account, a phone call to the judgment creditor’s attorney explaining that your funds do fall under the exempt benefits should be more than enough in order to vacate the judgment. The attorney may ask for proof, in which 3 months bank statements of those deposits can be sent over via email, or fax.
If the funds in your frozen bank account includes nonexempt funds, or recent wages, it is best to go to court. Negotiation is easier in court than via email or telephone calls. Taking it to court and vacating the judgment is in your best interest, being that judgments can affect a number of different aspects in your life. Judgments can appear on your credit report affecting your employment, housing and ability to obtain loans. Despite just that, unpaid judgments are collectible up to 20 years in New York State. No actions taken can result in repeated efforts to freeze other bank accounts and/or garnish your wages.
What if my frozen bank account contains both exempt and nonexempt funds?
This type of scenario is known as having “comingled funds.” Exempt funds remain exempt, in which you can try to get the judgment creditor’s attorney to release them immediately although it may be more difficult for you to do that being that nonexempt funds do coexist in your account.
Why didn’t the bank notify me before freezing my account?
The Law unfortunately provides that once a bank receives a restraint notice, they are to immediately freeze your bank account without notifying you.
Why didn’t the judgment creditor notify me before freezing my account?
A judgment creditor is only required to do the following:
1. Notify you that they have filed a lawsuit against you
2. Notify you that they have obtained a judgment against you.
They do not have to give you specific notice before freezing your bank account but if the first notice you receive of any judgments against you is by learning that your bank account is frozen, then they have not properly notified you under the law.
Is it possible for judgment creditors to take money from my bank account once it is frozen?
If a creditor hires a New York City Marshal, then they are allowed to levy funds from your account.
If a debt collector does levy my funds, is it possible to receive my money back?
Yes, as long as you try to vacate the judgment in court, you are allowed to ask the court to return the funds back into your bank account.
Will the judgment creditor immediately take funds out of my account?
Attempting to levy funds from your account has no set time limit. Some judgment creditors wait a few weeks to start that process, while others do not levy funds at all.
What if the frozen bank account is a joint account?
More times than not, there is usually a judgment out for only one of the bank account holders, not both. Calling the judgment creditor’s attorney and asking for information about the case can clarify who the judgment is against.
If the judgment is against you, vacating the judgment in court is the best option. If the funds fall under the exempt benefits, then a simple telephone call to the judgment creditor’s attorney can get the freeze lifted immediately.
If the judgment is filed against the other bank account holder, it is also best that the other person vacates the judgment in court.
1. Under Banking Law 678, if you can prove that you have added the other person who has a judgment against them to your account only for convenience- your entire account can be released. Proving convenience entails of demonstrating that the joint account holder does not have right to half of the money in your bank account. You can prove this by showing that the other person did not have withdrawal privileges or an ATM card. Any other information that provides the account belongs to you alone also can release your bank account.
2. If you cannot prove convenience, then you can only recover half of the funds included in your joint bank account.
3. Under Banking Law 675, unless the judgment creditor proves that the money belongs to the other person and not to you, then the creditor cannot have more than half of the money in the account. This follows as such because the law presumes that in a joint account where convenience cannot be proven, half of the money in the account belongs to you, while the other half belongs to the other person.