Frozen Bank Account in New York City?
In New York, certain amounts and type of funds are protect from being frozen
in a bank account in reference to the collection of private debts. In
2008, the New York state legislature found that in some instances, creditors
were pursuing funds that were legally exempt from freezing and levying.
In order to stop these illegal account seizures the
New York Exempt Income Protection Act (EIPA) was enacted. Under EIPA, if a creditor attempts to freeze a bank account
belonging to the debtor, the first $2100 is protected. If the debtor receives
direct deposit of federally protected funds (listed below), then $2750
is protected. If a creditor has attempted to freeze exempt funds in your
bank account, then you would need to submit an Exemption Claim Form to
the creditor and the bank in a timely manner (within 20-days).
Tip: If your account contains
exempt benefit funds that are direct deposited, keep your balance
under $2750. Examples of such exempt funds are: Social Security, SSI, Veterans benefits,
disability, pensions, child support, spousal maintenance, workers compensation,
unemployment insurance, Public Assistance, Railroad Retirement benefits,
and Black Lung benefits.
Tip: If you are trying to protect your
earned income from being frozen in your bank account, keep you balance
under $2100. EIPA protects 90% of income earned in the prior 60-days. If these funds
were received via direct deposit, then it will be easier to show that
the funds are exempt as earned income.
There are basic exemptions for earned income. Essentially, 30 times the
minimum wage (net, after taxes) is protected per week. With a current
minimum wage of $8.75/hr, the weekly exemption amount is $262.50. If the
income is solely from public assistance or social-security, then the entire
income amount is exempt. If the debtors income exceeds the protected limits
on earned income, then 90% of the gross is exempt (or 75% of the disposable
income is exempt, whichever is higher).
The purpose of the Exempt Income Protection Act (EIPA) is to prevent debt
collectors and creditors from restraining protected bank funds for repayment
on private debts such as credit cards and some student loans.
Some examples of the types of funds that are exempt from debt collection are:
Alimony or child support
Any form of public assistance (eg. welfare)
Any income earned while on public assistance
Supplemental Security Insurance
Most public or private pensions
Retirement accounts (401k, IRA)
If you have received notice that your bank account is frozen, then your
first step is to completed the Exemption Claim Form and to submit it along
with supporting documentation. This must be done within 20-days of the
date of the notice of bank restraint. Once the form and documents are
submitted, the attorneys and the bank will review the account and should
release any funds deemed exempt. Complications can arise in the event
of co-mingling exempt and non-exempt funds.
Each case is unique. Contact an attorney for an evaluation of your particular
circumstances and to learn more about New York's Earned Income Protection Act.