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Exempt Income Protection Act (EIPA)

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:

  1. Social Security

  2. Disability Benefits

  3. Alimony or child support

  4. Any form of public assistance (eg. welfare)

  5. Any income earned while on public assistance

  6. Workers compensation

  7. Supplemental Security Insurance

  8. Most public or private pensions

  9. 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.