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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
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Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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Restraining Order EHow:A restraining order on a checking account

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Restraining Order EHow:A restraining order on a checking account is a lien or levy applied to an account after a court judgment gives the creditor the authority to do so. The creditor must notify you of the court petition and judgment against you but isn't required to notify you of the account freeze as they try to reclaim assets. Negotiating the release of the account may work in some cases, though other times, you might only get an account released after the creditor is paid in full. ================================

Yesterday I opened a checking account and it only has the initial balance of $50. Does a restraining order against the account mean a permanent freeze? There are multiple judgments into many thousands of dollars into 5 digits. When working I chose consecutive garnishment. Now retired I only have social security and pension benefits. I like to use direct deposit for my pension which is less than $1900 monthly. I may sell my cooperative apartment which is probably less than $160,000 and under New York State law is exempt too (CPLR article 52 part 5206) Without a checking account I have no way to make a deposit. Check cashing and a debit card for social security worked fine for many years.

Is the potential hassle worth it? Should the checking account be closed? This involves New York State Law
Hello again,

Note: Some commercial services on the internet provide information that is so frequently erroneous or incomplete as to rise to the level of malpractice -- sometimes even to the level of fraud. Which is why I cite statutes and case law to support my answers, so you can verify them independently. Caveat Emptor.

NY CLPR 5222 describes the law concerning enforcement of judgments against a debtor for any personal property other than the debtor's wages held by an employer (which is restrained by "garnishment," which is a separate legal process). A restraining order has a one-year lifespan, so if one has been issued against you at any banking institution, then you may as well forget about that bank for the next 365 days.

If the judgment was issued by a NY court (other than a U.S. District Court), then it is only enforceable in NY, unless the judgment is separately registered in a different state jurisdiction. Because of this, a debtor can open a bank account in another state, at a state-chartered bank with no branches in NY, and effectively avoid all attempts to execute against the debtor's accounts, unless and until the judgment is registered in the new state jurisdiction.

And, because it is practically impossible for a creditor to determine where a debtor banks (due to federal banking privacy laws), except via a judgment debtor examination, by using a bank in a different jurisdiction, the debtor can play "cat and mouse" at least 50 times (50 states and D.C., plus Virgin Islands, Puerto Rico, Guam, American Samoa). No creditor is so diligent as to follow the debtor to every state. Though, it's quite inconvenient to have to worry about moving money around.

Re the homestead exemption, it is:

  • $150,000 for NYC counties, Suffolk, Nassau, Putnam, Rockland, and Westchester counties,
  • $125,000 for Albany, Columbia, Dutchess, Orange, Saratoga, and Ulster counties, and
  • $75,000 for all other counties
NY CLPR 5206(a).

Hope this helps.
Customer: replied 4 years ago.

And, because it is practically impossible for a creditor to determine where a debtor banks (due to federal banking privacy laws), except via a judgment debtor examination (etc.)


 


 


Question: If so, unless deposed my present deposits are almost safe in a New York State bank?

"Almost" is not good enough -- for me, at least. Example: Creditor serves a judgment-debtor exam notice on you. You appear, and you are asked where your bank accounts are located. You must testify truthfully under oath. Assuming that you do, the creditor can immediately send a writ of execution from an NY court to the NY state bank and you're screwed.

Whereas, if the bank is located in NJ, CT, PA, etc., the creditor must first register the judgment in the new state, and then obtain a writ of execution to send to the bank. Meanwhile, you have drained the account and moved the money to a different state (or under your mattress.

Hope this helps.
Customer: replied 4 years ago.

Most commercial banks are federally chartered. If no branches in New York is tis safe. Or must an out of state bank be state chartered in the specific state?

Most commercial banks are federally chartered.

A: I do not know this to be true for a certainty -- however, I don't see its relevancy, so there's no reason to research the issue.

Or must an out of state bank be state chartered in the specific state?

A: Correct. That's the point. A state-chartered bank has no branches other than in the state of charter -- so, a creditor cannot serve a writ of execution in NY, because there won't be any NY branches.

Hope this helps.
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