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How Do Restraining Notices Work in Connection With Asset Levies?
When a creditor wins a judgment, this is just the beginning of a subsequent process that occurs in their attempt to collect funds.
A restraining notice is one method that allows them to hold funds in order to enforce collection. These are often used in conjunction with asset levies.
Restraining notices and asset levies work together in New York’s judgment enforcement process: the restraining notice preserves the debtor’s assets, while the levy is the legal mechanism used to seize and apply those assets to satisfy the judgment.
Why Choose Katz Melinger PLLC
At Katz Melinger PLLC, we help clients enforce judgments throughout New York, including matters involving restraining notices and asset levies. Our goal is to secure and collect assets lawfully, while protecting our clients’ rights every step of the way.
With our firm, we offer:
- Experience navigating restraining notices, levies, and turnover proceedings in accordance with New York law
- Strategic, efficient enforcement to preserve and seize assets before they can be moved or depleted
- Clear guidance on New York laws like CPLR § 5222, § 5222-a and related enforcement procedures
- Free, confidential consultations with our team
What Are Restraining Notices?
Restraining notices are legal documents typically initiated by a creditor after they’ve won a judgment against a debtor. The restraining notice is given to banks or other financial institutions to freeze the debtor’s assets before they can sell them or move them. A creditor can freeze assets up to double the amount of the debt. This ensures that the funds will be available for collection.
The New York Civil Practice Law and Rules (CPLR) § 5222 states that a restraining notice can be issued by the court clerk, the creditor’s attorney, or a support collection unit. The notice must include details of the judgment, a warning of the consequences of non-compliance (usually contempt of court), and detailed information on the prohibition of transferring or destroying funds and assets. The financial institution is legally obligated to comply with the restraining notice once it’s issued.
How Do Restraining Notices Work With Asset Levies or Turnover Proceedings?
A restraining notice freezes a debtor’s assets to prevent them from being transferred or depleted. This is often the first step before enforcing a judgment through an asset levy, which allows a creditor, usually via the sheriff or marshal,to seize and sell those assets to satisfy a debt.
The process typically begins when a creditor serves a restraining notice on the debtor or a third party, such as a bank or employer. This notice prohibits any further transfer or use of the identified assets. Once the assets are secured, the creditor may then direct law enforcement to levy them, meaning seizing property (i.e. bank accounts, real estate, vehicles, jewelry, wages, or business interests) and liquidating them to satisfy the judgment.
When assets are not immediately accessible, identifiable, or are being held by third parties, turnover proceedings may be necessary. In a turnover proceeding, the creditor asks the court to issue an order compelling the debtor, or a third party, to transfer specific assets directly to the creditor or to a sheriff for enforcement. This is especially useful when the assets are concealed, in dispute, located out of state, or when a simple levy isn’t feasible.
Do I Have Exemptions or Protections in Restraining Notices and Asset Levies?
New York acknowledges the fact that people have basic needs and necessities that must be met. Because of this, certain laws are in place to protect these assets that are essential for basic living needs. These include:
- Social security benefits
- Unemployment insurance
- Workers’ compensation
- Pensions
- Retirement benefits
- Child support
- Spousal support
- Welfare
- Veterans’ benefits
Additionally, certain percentages of wages and certain bank account amounts cannot be levied. An asset levy cannot wipe you clean of every single thing you own, leaving you unable to care for yourself. These protections are outlined in the Exempt Income Protection Act (EIPA) and § 5222-a.
These exemptions however only apply to individuals; company debtors have no exemptions. If a restraining notice is served on a company, there is no exemption to the company such as needing to make payroll.
What Is the Procedure for a Restraining Notice in New York?
To make sure that restraining notices are issued in due process, the state of New York mandates a general process for issuing one.
Banks and Restraining Notices
The restraining notice is issued to the bank or financial institution. For individuals, in the notice, they must include an exemption notice and two exemption claim forms.
- The bank must then restrain the debtor’s account. Within two business days, they must then mail a copy of the notice to the individual debtor. They must also send the debtor copies of the exemption notice and exemption forms.
- The debtor has 20 days to file for any exemptions. They can do this by returning the exemption form to both the financial institution and the creditor.
- The creditor must respond to the exemption. If they disagree with it, they can file a motion for the matter to be heard and decided by the court. This will officially resolve the dispute.
Lastly the restraining notice for banks, when the debtor is an individual, has more rules that must be strictly followed.
The restraining notice remains in effect until the judgment is satisfied, the creditor withdraws the notice, or a court orders the notice to no longer be in effect.
Restraining Notices and Debtors or Non-Financial Institutions
- The restraining notice issued to the debtor directly requires that the debtor restrain double the amount of the judgment until it is satisfied.
- The restraining notice issued to non financial institutions requires them to restrain double the amount of the judgment for one year. An example is where a contractor owes the debtor money.
- Lastly the restraining notice for banks, when the debtor is an individual, has more rules that must be strictly followed.
Once the debtor, or any third party is served with a restraining notice, the failure to comply with it exposes them, and any individual acting on their behalf, to the risk of contempt which could include jail and/or monetary penalties against them.
What Is the Procedure for Asset Levies?
Just like restraining notices, asset levies also have a procedure that is typically followed to ensure due process. The process usually commences as follows:
- The creditor or their attorney prepares an Execution document. This document is then delivered to a sheriff, or in New York City a Marshal, ment who has the authority to seize the asset.
- Before the asset can be levied, the creditor must reasonably identify the location of the property.
- The law enforcement officer can then levy the asset once it is identified.
- The asset is converted into cash and then applied to the judgment.
- A Full or Partial Satisfaction of Judgment is filed with the court.
- The debtor may challenge the levy in certain circumstances.
How Katz Melinger Can Help You
If you need to enforce a judgment or protect assets from improper seizure, our attorneys provide clear, actionable guidance on New York’s enforcement process.
Contact Katz Melinger today by calling 212-460-0047 to get started.
FAQs
What is a restraining notice in New York?
A restraining notice in New York, authorized under CPLR § 5222, is a legal order that directs a debtor or a third party, such as a bank or other entity holding the debtor’s property, to freeze assets up to twice the judgment amount. This restriction helps ensure funds remain available for possible collection.
How does a restraining notice work with an asset levy?
A restraining notice works with an asset levy by first freezing the debtor’s assets so they cannot be transferred or spent. An asset levy, carried out by a sheriff or marshal, then seizes and sells those assets, with the proceeds applied toward satisfying the judgment.
What assets can be levied in New York?
Assets that can be levied in New York may include bank accounts, real estate, vehicles, personal property, business assets, wages, or other property interests. The exact scope of what can be levied depends on the facts of the case and is governed by New York’s Civil Practice Law and Rules.
Are there exemptions from restraining notices and asset levies?
Yes. Exemptions from restraining notices and asset levies in New York apply mainly to individual debtors and may include Social Security benefits, unemployment insurance, workers’ compensation, pensions, child or spousal support, and certain bank account balances under the Exempt Income Protection Act (EIPA) and CPLR § 5222-a. Businesses do not receive these protections.
Additional Resources
For more on turnover proceedings in New York and New Jersey, you may also find these helpful:
- What Is a Turnover Proceeding and When Is It Used in New York?
- Using the Contents of a Safe Deposit Box to Satisfy a Judgment
- What to Do When a Debtor’s Assets Are Tied Up in a Corporation
The information provided should not be taken as legal advice. For the most current and thorough details, it is advisable to seek assistance from a legal professional by contacting a qualified attorney.
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