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Default Judgments in New York

Judgments in New York State very are often obtained by default. Default means that the defendant in a lawsuit did not answer or appear in response to a summons that was served upon them. In most debt collection cases, the plaintiff does not even have to obtain a judge’s approval to be awarded a default judgment. This is because under New York law a plaintiff can make an application to the court clerk for a default judgment if the claim is for a certain sum or for a sum that can by computation be made certain. Almost any case for breach of contract or credit card debt will fall into this category.

Judgments in New York can be enforced for twenty years from the date of entry of the judgment. In addition, judgments in New York accumulate interest at the rate of 9% per year. For consumer debts the interest rate is 2% per year, commencing in April 2022. Consumer debts are debts of a natural person in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family or household purposes.

Judgments can be enforced by means of income execution (wage garnishment), seizure of bank accounts and other property, and even the sale of real property. It is thus imperative that you do not ignore any legal papers that are served on you or mailed to you. A large judgment can be very detrimental to your financial well-being.

Vacating A Default Judgment In New York

Under New York law, a judgment debtor (the person or entity against whom a judgment has been entered) can file a motion to vacate a default judgment if certain conditions are met. The relevant statutes are Civil Practice Law and Rules 317 and 5015. In addition, a large body of case law in New York has established the particular facts and circumstances that must be established to allow a court to vacate a default judgment. The most common grounds used to vacate default judgments are:

  • A reasonable excuse for the default and a meritorious defense (CPLR 5015(a)(1). Note that the statute says “excusable default”, however the appellate courts in New York have held that the moving party must show that the excuse is reasonable and that the party has a meritorious defense. Both conditions must be met.

  • Lack of jurisdiction (CPLR 5015(a)(4). This generally means that that the defendant was not properly served with the summons and thus the court did not acquire jurisdiction over the defendant.

  • New York law also permits a defendant to vacate a default judgment when the defendant was served by means other than personal delivery and did not receive notice of the summons in time to defend the case and has a meritorious defense to the action. (CPLR 317.) To utilize this statute, the motion to vacate the judgment must be made to the court within one year after obtaining knowledge of entry of the judgment, but no more than five years after the judgment was entered.

While the above are the most commonly used provisions for consumers to vacate default judgments in New York, other grounds exist, including excusable default; fraud or other misconduct; and newly discovered evidence.

How A Summons May Be Served In New York

Whether a defendant can vacate a default judgment will often be determined by the manner in which the summons was served. It is therefore important to understand the methods by which a summons can be served in New York.

In New York, a lawsuit is commenced when a summons and complaint are filed with the clerk of the court. The plaintiff must then serve the defendant with a copy of the summons and complaint. New York law specifies how a defendant must be served in order for the court to obtain jurisdiction over the defendant. This is known as “service of process.” The three most commonly used methods of service are:

  • Personal delivery to the defendant. The process server must actually hand the summons to the defendant. If the defendant refuses to take the summons, the server may  leave it in the “general vicinity” of the defendant.

  • By delivering the summons within the state to a person of suitable age and discretion at the actual place of business, dwelling place or usual place of abode of the      defendant and by mailing the summons to the defendant’s last known      residence or actual place of business.

  • Affix and mail service, more commonly known as “nail and mail.” This is only permitted if service pursuant to the prior two methods cannot be accomplished with “due diligence.” The summons must be affixed to the door of either the actual place of business, dwelling place or usual place of abode of the defendant      and by mailing the summons to the defendant’s last known residence or      actual place of business. This is the most common type of service of process and the one most likely to permit the defendant to vacate a default judgment.

The following is an example of how failure to follow the rules of service of process can lead to a successful motion to vacate a default judgment. A creditor serves a defendant by leaving the summons and complaint on the door of a house ( “nail and mail” service). Let’s say that the defendant had moved out of the house several months or years earlier. The location where the summons was affixed was therefore not the defendant’s “actual dwelling place” or “usual place of abode”. The defendant does not receive the summons and the plaintiff proceeds to obtain a default judgment. Under this scenario, service would not have been properly effected and the defendant may have the default judgment vacated.

Procedure for Vacating a Default Judgment in New York

To vacate a default judgment in New York, the defendant must make an application to the court that rendered the judgment. In Nassau and Suffolk counties, this will most likely be either the District Court or the Supreme Court. In New York City, it will be the Civil Court or Supreme Court for the borough in which the defendant resides.

An application to vacate a default judgment is made by a procedure known as an “order to show cause.” The order to show cause must contain the legal grounds upon which the defendant seeks to vacate the judgment and an affirmation (sworn statement) from the defendant that provides the necessary facts to support the defendant’s application. If the order to show cause is prepared by an attorney, it will also contain the legal arguments in support of the request to vacate the judgment.

The order to show cause is presented to a judge who will direct the manner in which the papers are to be served on the plaintiff and the plaintiff’s attorney. Usually, this will be done by certified mail or overnight delivery. The judge will also determine the “return date” of the order to show cause, i.e., the date by which the plaintiff must file its reply to the defendant’s request. Certain courts and judges require that the parties appear in court on the return date.

  • Temporary restraining order – Orders to show cause to vacate default judgments often contain a request for a temporary restraining order, known as a TRO. The purpose of a TRO is to prevent the plaintiff from enforcing the judgment pending the court’s decision. This may be very important in cases where the plaintiff is attempting to garnish a defendant’s wages or seize property or money.

  • Traverse hearing – In cases where the facts surrounding service of the summons are in dispute, the court may order that a hearing, known as a traverse hearing, be held. In a traverse hearing, the plaintiff’s process server must testify as to how the summons was served on the defendant. The defendant, and any witnesses called by the defendant, will also testify.

After reviewing the papers submitted and hearing the testimony (if a traverse hearing is held), the court will make a decision. If the court determines that the summons was not served properly, then the case will be dismissed. The plaintiff would then have to commence a new lawsuit. However, if the statute of limitations had expired by that time, the defendant could raise the statute of limitations as an affirmative defense and successfully defend a new lawsuit.

Alternatively, if the court determines that the service was proper but that the defendant did not actually receive the summons, and has a meritorious defense, the defendant will be permitted to serve an answer and defend the action.

Using Bankruptcy To Discharge Default Judgments

A Chapter 7 or Chapter 13 bankruptcy is often the most efficient and cost-effective response if you have had multiple default judgments entered against you. This is especially true when you do not have any valid legal grounds to vacate the default judgments. Because bankruptcy will discharge your obligation to pay most debts, filing for bankruptcy will usually make it unnecessary to vacate default judgments in the state court.

It is important to keep in mind that bankruptcy will discharge your personal obligation to pay most debts. However, if you own a home or other real property, and a default judgment has been entered against you, a judgment lien will be placed on your property. These judgment liens can often be voided in bankruptcy. 

Call Today for Help With Default Judgments in New York

Andrew M. Doktofsky represents Long Island and New York City clients in a full range of matters relating to debts, collections, and judgments. If a default judgment has been entered against you in New York, call (631) 673-9600, or complete the contact form below, for a free initial telephone consultation.

Andrew M. Doktofsky P.C.  is a debt relief agency. I help people file for bankruptcy relief under the Bankruptcy Code.

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