Which creditor gets the first crack at your personal property? The answer to that is the scope of this blog post.
In our practice, most of our work involves defending against wage garnishments and bank restraints. But of course, it’s useful to know all applicable laws when different types of creditors are pursuing different types of assets other than money. That’s where New York CPLR § 5234 comes in. This statute, however, does not address lien priority against real estate, which is governed by CPLR § 5203, discussed here.
New York CPLR § 5234 lines up creditors to determine priority in a debtor’s personal property. "Personal property" typically refers to any movable property that is not real estate. This can include things like vehicles, jewelry, furniture, bank accounts, wages, securities, intellectual property rights, and other tangible or intangible assets. The CPLR doesn’t provide a specific definition of personal property in § 5234 itself, but it outlines the distribution of proceeds obtained from the seizure of such property to satisfy a judgment.
CPLR § 5234 addresses the timing issues of taking certain actions (delivery of an execution v. levy) between different types of creditors (execution creditors v. judgment creditors). The first part of the statute is a straightforward rule as to how proceeds are distributed after the property is seized.
Here’s a summary of the law:
CPLR § 5234: Distribution of Proceeds of Personal Property & Priorities
1. Distribution of Proceeds of Personal Property
Once a property seizure happens, two things must occur before the proceeds of the personal property or debt acquired by a receiver or a sheriff (or other officer authorized to enforce the judgment) are distributed to the judgment creditor:
i. payments and fees are deducted
ii. expenses and any taxes are levied upon sale, delivery, transfer or payment
Distribution of proceeds can not be made until fifteen (15) days after service of the execution except upon order of the court and any excess is paid to the judgment debtor.
2. Priority Among Execution Creditors
What happens when more than one creditor is trying to claim the same debtor’s assets? Generally speaking, they are satisfied with the proceeds of personal property or debt levied upon them by the officer or the support collection unit in the order in which they were delivered. However, executions for child support have priority over any other assignment, levy, or process.
When two or more executions or attachment orders are issued against the same judgment debtor or obligor and delivered to different enforcement officers, the proceeds are applied in this order:
i. in satisfaction of the execution or order of attachment delivered to the officer who levied
ii. in satisfaction of the executions or orders of attachment delivered to those of the other officers who, before the proceeds are distributed, make a demand upon the officer who levied, in the order of such demands
Note: This presumes that the personal property or debt is levied within the jurisdiction of all officers.
Again, executions for child support have priority over any other assignment, levy, or process. However, when there is more than one past-due child support order, the proceeds are applied to the orders in proportion to the amount each order's claim bears to the combined total.
An execution or order of attachment returned by an officer before a levy or delivered to him after the proceeds of the levy have been distributed can not be satisfied out of those proceeds.
3. Priority of Other Judgment Creditors
Where personal property or debt has been ordered, delivered, transferred, or paid (or a receiver or receivership has been ordered), and the order is filed before the property or debt is levied upon, then the rights of the judgment creditor who secured the order are superior to those of the judgment creditor entitled to the proceeds of the levy.
Where two or more such orders affecting the same interest in personal property or debt are filed, the proceeds of the property or debt must be applied in the order of filing. Where delivery, transfer, or payment is not completed within sixty (60) days after an order is filed, the judgment creditor who secured the order will be divested of priority. However, a 60-day extension may be ordered.
If you have questions about the distribution of proceeds of personal property or who gets it first, contact an experienced attorney to make sure you understand your rights.
10 Key Elements of CPLR § 5234
(Distribution of proceeds of personal property; priorities)
Distribution of Proceeds: After deductions for fees, expenses, and any relevant taxes, the proceeds from personal property or debt acquired by the enforcing officer (like a sheriff) will be given to the judgment creditor, and any excess is paid to the judgment debtor.
15-Day Waiting Period: No distribution of these proceeds shall be made until fifteen days after the service of the execution, unless there's a specific order from the court stating otherwise.
Priority among Multiple Execution Creditors: If more than one execution or order of attachment targets the same debtor and is delivered to the same enforcement officer, these shall be satisfied from the proceeds in the order they were delivered.
Child Support Has Priority: Executions for child support will always have priority over any other type of claim, assignment, or process.
Different Enforcement Officers: If multiple executions or attachment orders are delivered to different officers and property or debt is levied within the jurisdiction of all these officers, the proceeds first go to the officer who carried out the levy. Then, they're distributed based on the order of demands made by other officers.
Proportional Distribution for Multiple Child Support Orders: If there are multiple overdue child support orders, the proceeds are distributed proportionally based on the amount of each order relative to the combined total.
Rights of Secured Party: Nothing in this section should be construed to undermine the rights of any secured party as defined elsewhere (specifically in the uniform commercial code).
Unsatisfied Executions or Attachments: If an execution or order of attachment is returned before a levy or after the distribution of the levy's proceeds, it cannot be satisfied from those proceeds.
Superiority of Judgment Creditor with Filed Order: If an order for delivery, transfer, or payment of personal property or debt is filed before the levy, the rights of the judgment creditor who secured that order are superior to those of the creditor entitled to the levy's proceeds.
60-Day Rule for Order Completion: If the transfer or payment isn't completed within sixty days after an order is filed, the creditor who secured the order loses priority. However, this can be overridden if specified in the order or if there's an extension order filed within those sixty days.
This section provides a structured framework to manage potential conflicts between different creditors and ensure the orderly distribution of a debtor's personal property or debt proceeds.
Five Key Takeaways From This Blog
New York's CPLR § 5234: This statute outlines the order of priority for creditors when it comes to a debtor's personal property. It provides clarity on how and when proceeds are distributed after a property is seized.
Distribution of Proceeds of Personal Property: After a property seizure, two actions must first take place before distribution to the judgment creditor:
- Deduction of payments and fees.
- Levy of expenses and any taxes upon sale, delivery, transfer, or payment. Additionally, distribution cannot occur until 15 days after the service of the execution unless ordered otherwise by the court.
Priority Among Execution Creditors: If multiple creditors are vying for a debtor’s assets, the proceeds from the personal property or debt are generally distributed based on the order in which they were delivered. However, there's a notable exception: executions for child support always have priority.
Priority of Other Judgment Creditors: If personal property or debt has been ordered, delivered, transferred, or paid and this order is filed before the levy on the property or debt, then the rights of the judgment creditor who secured the order are superior. In situations where multiple such orders are filed affecting the same property or debt, they are satisfied based on the order of their filing.
Seek Legal Guidance: The blog emphasizes the importance of understanding one's rights in terms of personal property distribution and creditor priorities. If there are uncertainties or questions, consulting with an experienced attorney is recommended to ensure one's rights are understood and protected.
