Key Takeaways for Protecting Your Money from Creditors
Certain Funds are Off-Limits to Creditors: There are specific types of income that creditors cannot touch, no matter what. These include:
- Social Security and Disability Benefits
- Supplemental Security Income (SSI)
- Public Assistance (Welfare)
- Veterans Benefits
- Unemployment Insurance
- Pension and Retirement Account Payments
- Disability Benefits
- 90% of Income Earned in the Last 60 Days
- Worker's Compensation
- Child and Spousal Support
- Railroad and Black Lung Benefits
- Covid-19 Stimulus Relief
- Statutory Exemptions (vary by county in New York)
Act Quickly to Claim Your Exemptions: If a creditor freezes your bank account, you must immediately claim these exemptions. The process is outlined in New York CPLR § 5222-a. I'll explain the steps at the end of this post.
What to Do If Your Bank Account is Frozen
- Don't Panic: If your account is frozen, it's crucial to act fast but stay calm.
- Claim Your Exemptions: You'll need to send an "exemption claim form" to the bank and the creditor's lawyer. This form lets you check off the exemptions you're claiming.
- Provide Supporting Documents: Along with the form, send proof like pay stubs, bank statements, or benefit statements. This evidence is vital to show that the money in your account falls under the exempt categories.
A Real-World Example: The Case of Midland Funding, LLC vs. April Singleton
In this case, the debtor, April Singleton, made a crucial mistake. She provided pay stubs but didn't include bank statements to prove that her income was indeed deposited into the frozen account. This oversight led to a legal challenge from the creditor.
How to Properly Claim Exemptions in New York
- Get the Forms: The bank should send you exemption claim forms within two days after your account is frozen.
- Submit Your Claim: Fill out the forms and attach your proof. Send these to the creditor's lawyer and the bank within 20 days of receiving the forms.
- Wait for a Response: The creditor's lawyer must either release the funds within seven days if your proof is solid or object to your claim within eight days.
Important Tips
- The Most Common Exemption: The income earned in the last 60 days is a frequent exemption. Many people live paycheck to paycheck, and this exemption often applies.
- Provide Complete Proof: Always include bank statements with your pay stubs to avoid challenges.
- Seek Legal Help: If you're unsure or overwhelmed, don't hesitate to call for a free consultation. I'm here to help!
