What is a Levy?
The verb "to levy" means "to take or seize property in execution of a judgment." Used in a sentence: "The judgment creditor may levy on the debtor's assets."
A levy is the final stage of a collection proceeding where a sheriff, marshal, or "Support Collection Unit" (in family or matrimonial matters) seizes your property to collect on a judgment obtained by your creditor.
Collection law relating to the enforcement of money judgments employs plenty of legalese. This post summarizes New York statutory law (CPLR § 5232) as it relates to personal property only.
New York specifies two methods to levy on personal property: 1) levy by service of execution and 2) levy by seizure.
1. Levy By Service of Execution (for property that isn't "capable of delivery" like your future wages or bank funds)
A designated sheriff, marshal or support collection unit will serve a copy of the execution in the same manner as a summons. Service must be made to the debtor or person who has custody of the property ("garnishee"). The levy will only be effective if the debtor or obligor (someone who has custody of the item), at the time of service:
- owes the debt,
- is in possession or custody of the item part of the debt, and
- knows it is part of the debt.
An example would be an automobile in the custody of a debtor personally or someone using the automobile.
Properties not capable of delivery (such as a house or piece of land) are also subject to levy. The person served with the execution must transfer the property, pay the sheriff or support the collection agency regarding all debts upon maturity and execute any document necessary to effect the transfer or payment. The levy only applies to the specified property.
Here is a summary of the common "Income Execution" that acts to levy against your wages. You may have received a Notice of Garnishment from a Marshal (i.e., Marshal Bienstock, Daly, Moses, or Biegel) or Sheriff threatening a wage garnishment.
Waiting period. Until the transfer or payment is made, or 90 days has expired, whichever comes first, the debtor or garnishee (person holding the property) cannot sell, assign, transfer or dispose of the asset to anyone other than the sheriff or support collection unit without a court order. If, after 90 days, the debtor or garnishee has not turned over the targeted property, the levy generally becomes void unless the creditor starts one of the following proceedings: 1) a proceeding under section 5225 (Payment or delivery of property of judgment debtor) and/or 2) 5227 (Payment of debts owed to judgment debtor). These proceedings are known as "perfecting the levy."
Note that judgment creditors and support collection units can be held liable for any damages sustained to the property pursuant to a wrongful levy.
2. Levy By Seizure
For personal property capable of delivery, a sheriff, marshal, or support collection unit can take the property into custody without interfering with the lawful possession of pledgees and lessees. The property owner or person in custody of the property must be served the execution in the same manner described above. The law enforcement officer then has 60 days to sell the property.
Notice to judgment debtor or obligor. For both, If a notice has not been served on the judgment debtor or obligor* with a year, then the sheriff or support collection unit must send a copy of the notice to the debtor within four (4) days – either by personal delivery or first class mail. The notice must contain the name and address of the judgment creditor or the judgment creditor's attorney or the support collection unit.
*An obligor is an individual (other than a judgment debtor) who is generally obligated to make a payment pursuant to a court order of competent jurisdiction that is in "default" of that order.
3. Required Notices
A notice sent by mail must be sent to the debtor's residence. However, if returned as undeliverable or that address is unknown, then the notice should be sent to the debtor's place of employment, marked "personal and confidential," and not reveal from whom the notice was sent.
4. Payments
If direct deposit or electronic payments were made to the judgment debtor's account during the forty-five (45) day period preceding the date the execution notice was served on the garnishee banking institution, then it will not execute, levy, attach, garnish or otherwise restrain or encumber two thousand five hundred dollars ($2,500) in the judgment debtor's account.
An execution will generally not apply to an amount equal to or less than the greater of
- two hundred forty (240) times the federal minimum hourly wage prescribed in the Fair Labor Standards Act of 1938 or
- two hundred forty (250) times the state minimum hourly wage.
This amount must be equal to seventeen hundred forty dollars ($1,740) and rises in tandem with the minimum wage.
Nothing in this subsection must be construed to:
- limit a banking institution's right or obligation to restrain, remove or execute upon such funds from the judgment debtor's account if required
- enforce a child support, spousal support, alimony or maintenance obligation or by a court order
- alter the exempt status of funds that are protected from execution, levy, attachment, garnishment, or other legal process
- affect the right of a judgment debtor to claim such exemption
5. Fees
Banks cannot charge fees for failing to garnish or execute a debtor's account, regardless of any agreements. Sheriffs or support units must serve banks with exemption notices and forms alongside the execution. Banks cannot transfer funds for 27 days and must wait 30 days for exemption claims before releasing funds. Fee rules don't apply if the judgment creditor is the state of New York or if the debt is for child support, spousal support, maintenance, or alimony, provided the execution is properly labeled. Levies on personal property are narrowly construed, so consult an attorney if facing one.
Based on Section 5232 of the New York Civil Practice Law and Rules (CPLR), the elements and requirements for the judgment debtors (your clients) in response to a notice of levy by the sheriff are as follows:
Obligations of Judgment Debtors:
Levy upon Personal Property (5232(a)):
- Non-exempt Personal Property: The sheriff may levy on non-exempt personal property of the judgment debtors by serving an execution on a third party (garnishee) who holds the debtor's property or owes a debt to the debtor.
- Transfer and Payment: The person served with the execution (garnishee) must transfer the non-exempt property or pay the debt to the sheriff. The judgment debtor does not directly interact with the garnishee but is indirectly affected by the garnishee’s compliance.
Levy by Seizure (5232(b)):
- Seizure of Property: If the property is capable of delivery, the sheriff may seize it directly. The sheriff must serve a copy of the execution to the person from whom the property was seized.
Notice to Judgment Debtor (5232(c)):
- Notice Requirement: The sheriff is required to send a copy of the execution to the judgment debtor by first-class mail or personal delivery. This notice must be sent within four days of serving the execution on the garnishee.
- Addressing the Notice: The notice should be sent to the debtor’s residence or, if that is unknown, to their place of employment or any other known address. The notice should not disclose that it is from the sheriff or related to a debt on the envelope.
Obligations if Debtors Do Not Comply:
Non-response to Notice of Levy:
- Levy Execution: If the debtors do not respond, the sheriff can still proceed with the levy, and the garnishee (third party) will be obligated to transfer or pay the property or debt to the sheriff.
- Potential Consequences: Failure to comply with the levy notice may result in the sale of the judgment debtor's non-exempt property to satisfy the judgment. Additionally, the judgment debtor risks the imposition of further legal actions or penalties for non-compliance.
Obligations if They Do Respond:
- Providing Information: If the judgment debtors decide to comply, they may need to provide an inventory of non-exempt assets and assist in the execution process.
- Avoidance of Penalties: By responding and complying, the debtors can avoid further legal consequences and potentially negotiate or settle the debt under better terms.
Key Points to Note:
- Exemptions: Certain property or income might be exempt from levy under New York law (e.g., specific amounts in a bank account as mentioned in subsection (e)).
- Garnishee’s Role: The garnishee (e.g., a bank or employer) is prohibited from transferring or interfering with the levied property or debt except as directed by the sheriff or court.
The judgment debtors have a legal obligation to either comply with the levy by providing the necessary information or face the legal consequences of non-compliance, which may include the forced sale of their non-exempt assets.
Case Study: Vehicle Seizure in New York: A Sheriff's Guide to Compelling Judgment Debtors to Surrender Their Cars
Here are the key points regarding how a sheriff in New York can compel a judgment debtor (JD) to give up their car:
- Seizure and forfeiture: Under certain circumstances, such as aggravated unlicensed operation of a motor vehicle, a sheriff can seize a vehicle. This is outlined in New York Vehicle and Traffic Law Section 511-C.
- Execution on personal property: CPLR §§ 5232 and 5233 allow for execution on the debtor's personal property, which would include a car. The sheriff can seize the vehicle under a properly issued execution.
- Notice requirements: Before seizing the vehicle, proper notice must be given to the owner. This includes:
- Personal service on all registered owners of the vehicle
- First class mail to individuals who have notified authorities that they are owners
- Notice to anyone holding a security interest in the vehicle
- Turnover order: The judgment creditor can seek a court order requiring the debtor to turn over the vehicle to the sheriff. This is more common when the debtor is not cooperating.
- Levy: The sheriff can levy upon the vehicle by serving an execution. This creates a lien on the vehicle and forbids the debtor from selling, transferring, or interfering with the property.
- Physical seizure: If necessary, the sheriff can physically take possession of the vehicle. However, this is often a last resort due to potential liability and practical difficulties.
- Cooperation not required: The judgment debtor is not legally obligated to cooperate or voluntarily hand over the vehicle. The sheriff must follow proper legal procedures to seize the asset.
- Time limitations: There are time limits on how long a levy remains effective, typically 90 days unless extended by court order or other legal action.
It's important to note that the specific process may vary depending on the circumstances of the case and local procedures. The judgment creditor often needs to provide information about the vehicle's location and take proactive steps to assist the sheriff in locating and seizing the asset.
Conclusion: Empowering Yourself in the Face of Levies
Understanding levies and the intricacies of New York's collection law is the first step in safeguarding your assets and rights. But knowledge alone isn't enough. Here are some actionable tips to empower you further:
Stay Informed: Always read any legal documents or notices you receive thoroughly. If there's something you don't understand, seek clarification immediately.
Act Promptly: If you receive a notice about a potential levy, don't delay. The sooner you address the issue, the more options you'll likely have available to you.
Document Everything: Keep a record of all correspondence, payments, and any other interactions related to the debt. This can be crucial if there's a dispute later on.
Know Your Exemptions: New York law provides certain exemptions that can protect your assets from levies. Familiarize yourself with these or consult with an attorney to understand what might apply to your situation.
Seek Legal Counsel: If you're facing a levy, it's wise to consult with an attorney who specializes in consumer law or debt collection. They can provide guidance tailored to your specific situation, ensuring that your rights are upheld.
Negotiate When Possible: Before things escalate to a levy, consider reaching out to the creditor to negotiate a payment plan or settlement. They might be willing to work with you, especially if they believe the alternative is getting nothing.
Stay Calm and Composed: Facing a levy can be stressful, but panicking won't help. Approach the situation methodically, armed with knowledge and the right support.
