It's a common situation. You receive a letter from your bank informing you that a "Restraining Notice" has been served on the bank and that funds in your account are being held to satisfy a judgment. This is commonly referred to as a "frozen" bank account.

 

How Does This Happen?

 

In order to serve a restraining notice, a creditor must first obtain a judgment against you. The amount restrained is double the judgment amount. In most instances, judgments are obtained by default, i.e. you were a defendant in a lawsuit and did not respond to a summons. It is quite common for summonses to be served improperly, e.g. to an address that you no longer live at.

 

 

What Happens After the Restraining Notice is Served?

 

The creditor's attorney will serve an Execution on the Sheriff's Office (or Marshall in New York City), directing the Sheriff to levy on the bank account. The Sheriff will then make a demand on the bank to turn over the funds in the account. The Sheriff then turns over the amount collected to the creditor's attorney. The Sheriff's fees are added to the amount seized.

 

What About Joint Bank Accounts?

 

Banks will not turn over funds held in joint bank accounts without a court order, which creditors rarely obtain.

 

For How Long is a Restraining Notice Effective?

 

One year. If a restraining notice has been in place on your account for over one year, it is no longer effective and you should have access to the account.

 

What are my Options?

 

• If you were not served with the summons, an Order to Show Cause can be filed to have the judgment vacated. Even if you were served, you may have grounds to request that the judgment be vacated. Contact my office for more information on how this can be done.
• You may want to consider bankruptcy. However, this is usually only advisable if you have other debts. Once a bankruptcy petition is filed, your accounts must be released. If the funds have already been seized from your bank account by the Sheriff, you can still get the money back if you file for bankruptcy within ninety (90) days from the date that the money was seized. (This is known as avoiding a preferential involuntary transfer). Keep in mind, however, that the exemption limit for cash and bank accounts in New York is $2,500. So if you have more than that amount in an account that is frozen (or that you will seek to recover as an involuntary transfer), the bankruptcy trustee is entitled to any amount over $2,500. However, most trustees will not be interested in administering assets of less than $1,500. The exemption limit applies to the total of all of your bank accounts (and tax refunds not yet received). Click on the Property Exemptions page to learn more.