Money Judgments

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How a money judgment is enforced and what you can do. This slideshow provides general information and does not provide legal advice, which you can only get from an attorney.

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Money Judgments

  1. 1. Money Judgments How a money judgment is enforced and what you can do.
  2. 2.  A judgment is a piece of paper issued by the Court stating that the creditor (or other plaintiff) has won the lawsuit and is entitled to a certain amount of money What is a money judgment?  Once the creditor has a judgment against you for a certain amount of money, the creditor can employ a host of methods to collect the money that are unavailable without a judgment  The judgment must be “entered” -- that is, filed with the court clerk  Filing usually happens a day or two after the judge issues the judgment  After the judgment is filed, the court or the creditor’s attorney should send you a copy A creditor gets a judgment when it wins a lawsuit against you.
  3. 3. Your creditor will get a judgment against you in any of the following situations: How Did It Happen?  You don’t respond to the summons by mailing the creditor’s attorney an “answer”  You don’t respond to motion papers that you receive in the mail by sending a written response and showing up in court  You do show up in court but you lose your case A creditor can win their case and be awarded:     Money you owe Interest on the debt Court Costs Attorney Fees
  4. 4. A Creditor can:  Take money from your pay  Freeze your bank account  Demand personal belongings  Get money when you sell your home How do they get the money? There are four ways a judgment can be collected: 1. 2. 3. 4. Garnishment Bank Accounts Personal Property Your Home
  5. 5. Garnishment  This means that money will be taken out of your paycheck to pay back the judgment amount  You will get a notice stating that an “income execution” will be served on your employer unless you start paying the judgment amount in installments to the Sheriff  Your income may normally be garnished at 10% of your gross (pre-tax) income
  6. 6. Limitations of Garnishment  Your weekly income after tax cannot be reduced below 30 times the minimum wage (currently $217.50 weekly)  The “income execution” notice will also explain that you have the right to challenge the income execution
  7. 7. Disposable Income This is the amount of money you take home in your pay after deductions are made for taxes, Social Security and unemployment insurance. Gross Income Is the amount of money you make before any of the above deductions are taken. Garnishment is based on your Disposable Income. Social Security and other benefits are exempt from collection and cannot be garnished.
  8. 8. How Much Can Be Taken Per Week? Disposable Income < $217.50 per Week Disposable Income > $217.50 < $290 Disposable Income > $290 All of your earned income is exempt from debt collection. Your wages CANNOT be garnished. The creditor may garnish the LESSER of: The creditor may garnish the LESSER of: Whatever you earn above $217.50 per week; 10% of your gross income; - OR 10% of your gross income. The amount you earn above $217.50 is usually less than 10% of your gross income. - OR 25% of your disposable income. 10% of your gross income is usually less than 25% of your disposable income.
  9. 9. Multiple Garnishments  You can be garnished for a private debt even if you are already being garnished for child and/or spousal support, but only up to 25% of your disposable income  You can be garnished for multiple private debts    generally, the first creditor takes the maximum amount possible the second creditor must wait until you finish paying the first creditor only then can the second creditor garnish your wages
  10. 10. How Does Garnishment Work?  All wage garnishments for private debts begin with a debt collection lawsuit  The creditor uses a judgment against you in order to garnish your wages  The creditor will send the wage garnishment notice to the Sheriff or Marshal  This notice is called an "income execution"
  11. 11. Executing the Garnishment  The Sheriff or Marshal must serve you with a copy of the income execution within 20 days  Once you are served with the income execution, you have 20 days to call the Sheriff/Marshal to arrange a voluntary payment plan  If you do not contact the Sheriff or Marshal within 20 days, they will serve the income execution on your employer  Your employer will begin sending 10% of your gross earnings to the Sheriff or Marshal  The Sheriff/Marshal must send you a periodic accounting stating: 1. how much you have paid 2. how those payments have been applied, and 3. how much you have left to pay
  12. 12. How to Stop Garnishment  Going to Court to have the default Judgment vacated can:  stop the garnishment  remove/prevent the judgment from showing on your credit report  allow you to file a claim to be repaid money already garnished  You must have valid grounds to have the judgment vacated  If you do not wish to go to court, then you can always contact the Sherriff/Marshal or your judgment creditor in order to make voluntary payment arrangements
  13. 13. Employer Response to Garnishment  Your employer cannot fire you the first time you are garnished  Your employer may be able to fire you if you have a second garnishment
  14. 14. If You Can’t Afford It  You have the right to go to court and ask the court to modify the amount of your garnishment  go to the court with a copy of the income execution and tell the clerk that you want to file an "order to show cause" to modify the wage garnishment  be prepared to explain to the court why the current garnishment amount is too high  bring proof of your income, rent, bills, and monthly expenses in order to prove to the judge that you should be garnished at a lower rate  be prepared to show that the current rate of garnishment prevents you from paying for necessities, like rent, food, utilities, or necessary medical care
  15. 15. Restraining Notice and Levy The attorney for the judgment creditor may serve a restraining notice on you or other persons. The purpose of a restraining notice is to prevent you or any person from selling or transferring any property that the creditor may seize in order to satisfy the judgment.
  16. 16. Your Bank Account  Neither the bank nor the creditor is required to give notice before freezing your bank account    the creditor must notify you if it has filed a lawsuit against you the creditor must notify you if it has won a judgment against you you have not received proper notice under the law if your first notice of a court case is a frozen bank account  The bank will send you a letter notifying you once the account is frozen    the letter will contain information to help you declare exempt funds and allow you to demand an immediate release on your funds you may need to contact the creditor’s attorney to demand a release you may want to go to Court to vacate the default judgment
  17. 17. What Your Bank Does If your bank is served with a restraining notice, it will put a freeze on your account for double the amount of the judgment plus fees.  Certain income deposited into the account, such as public assistance and social security income or other benefits, and 90% of your earned income from a job, is exempt from being used to execute a judgment  If you do not claim an exemption, the attorney may serve through the Sheriff (or Marshal) a “levy” commanding the bank to transfer the restrained funds to the attorney to be applied to the judgment
  18. 18. If You Receive a Restraining Notice  Your bank must send you the Exemption Notice and Exemption Claim Form within two (2) business days of freezing your account  Do not ignore it  If you believe that the judgment creditor may seize or has already seized any exempt funds immediately contact the judgment creditor’s attorney with proof that the funds are exempt
  19. 19. Exemption Claim Form When serving a restraining notice or levy on your bank, the creditor’s attorney is required to provide the bank a copy of an “exemption claim form” that the bank must forward to you so that you may assert a claim that your bank account contains exempt funds  You will receive this notice after the account is frozen You must complete the Form and mail it to your bank and the creditor’s attorney within 15 days to prevent the creditor from taking your money.
  20. 20. If Your Account Contains Exempt Funds  If your account contains exempt funds, such as public benefits or retirement payments or money earned from a job within the last 60 days, you should fill the form out and return it promptly to the bank and attorney claiming the exemption  This may result in release of the funds, or the attorney may ask the court to hold a hearing to decide whether the funds are exempt from collection Example of Exempt Funds  Social Security  Supplemental Security Income (SSI)  Veterans Benefits  Disability  Workers Compensation  Unemployment Insurance  Public Assistance  Railroad Retirement Benefits  Black Lung Benefits
  21. 21. When Your Bank Account is Frozen  You can put money into your account but there is a limit as to how much you can withdraw from it    money you deposit may be frozen and then unavailable to you you may want to stop depositing money into the account after it is frozen The account may show a negative balance because the creditor will generally put a hold on it for twice the amount of the judgment against you    you do not actually owe all of this money to the judgment or creditor the amount you owe is the amount of the judgment Your account is frozen as means to pressure you to pay the creditor
  22. 22. Limits on Frozen Accounts  Your bank account cannot be frozen if the balance is less than: $2,625 - for cases filed after January 1, 2012 -$2,500 - for cases filed before January 1, 2012  exemption only applies if there are direct deposited benefits such as social security in the account  Accounts containing less than $1,740 cannot be frozen
  23. 23. Exempt Income Protection Act of 2008 Complete and return the Exemption Claim Forms Some money held in bank accounts is protected to ensure that consumers have sufficient funds available to meet their basic needs, such as rent, food, and medicine.
  24. 24. Proving Exempt Income  Notify the attorney that all the funds in your bank account are exempt from debt collection   demand an immediate release of your account If the attorney asks you to fax or mail proof of your exempt income    you can send up to three months of bank statements as proof redact (black out or remove) information from your bank statements to protect your privacy the attorney only needs to see deposits, not things you paid out  Do not be surprised if the attorney delays taking action, makes excuses or stalls on releasing your funds  Even if your funds are exempt, you should still go to Court to vacate the default judgment if possible
  25. 25. Direct Deposits If you get direct deposit of the exempt funds already referenced in this presentation, your bank must leave at least $2,500 in the account. Manual Deposit If your exempt funds are not directly deposited into your account, your bank may not be aware that you have exempt funds in the account and might freeze funds you have over $1,740.
  26. 26. Joint Accounts  Joint bank accounts can be frozen even if there is a judgment against only one of the account holders  If the account contains only exempt income you should work with the bank and contact the attorney to obtain release of the exempt funds  Examples of protected income in a joint account would be:  a parent's pension  your child's Supplemental Security Income (SSI)
  27. 27. Judgment Against Someone Else  The best way to unfreeze your money, is to have the holder who has the judgment file with the Court to vacate it  If vacating the judgment is not possible, you can go to Court to obtain release of your account under Banking Law 678:  in order for your entire account to be released, you must prove that you added the other person to your account for convenience only  you must prove that you did not intend to give the joint account holder the right to own half of the money in the account  you can show that the joint account is for your convenience only by demonstrating that you are the only person who used the account  show that the other person did not have an ATM card or withdrawal privileges  provide other information to show that the account actually belongs to you alone  ask your bank to write a letter stating that the joint account was for purposes of convenience only
  28. 28. Recovering Half of the Account If you cannot prove that the joint account is for convenience only, then you can recover half of the money in the account.  under Banking Law 675, the judgment creditor cannot have more than half the money in the account unless it proves that the money belongs to the other person, and not to you  the law presumes that half the money in the account belongs to you and half belongs to the other person
  29. 29. Taking Your Money A creditor or debt collector can serve a levy through the Sherriff to obtain funds from your account.  There is no set time limit   some judgment creditors try to seize funds right away, and others never actually take funds at all most judgment creditors will wait at least a few weeks before attempting to levy your bank account  You can often get your money back if you go to Court   file to vacate the default judgment in the filing, you can ask the court to order the creditor or debt collector to return your funds
  30. 30. 25 Days Notice  A levy can't happen "right away" or on less than 25-days notice.  The bank must wait 25 days for the return of the Exemption Claim Forms.
  31. 31. Exceptions to the Exempt Income Protection Act Certain types of creditors may be able to freeze your bank account even if the account contains exempt funds. Examples:   student loan debts child support arrears
  32. 32. Garnishment and Your Bank Account  It is generally not possible for a creditor to garnish your pay and freeze your bank account at the same time  If you are already being garnished at the maximum amount, the rest of your wages should be exempt from debt collection, even if they are deposited into your bank account
  33. 33. IMPORTANT!!! 90% of income earned within the last 60 days is exempt from debt collection. If you have a frozen bank account, and all the money in the account is from recent paychecks, odds are it is all exempt from debt collection.
  34. 34. The Best Protection  The best way to protect your exempt benefits is to sign up for direct deposit and keep your bank balance below $2,500  The best way to protect your earned income is to keep your bank balance below $1,740
  35. 35. Retirement Funds Retirement funds are exempt from debt collection. These would include:  public and private pensions  retirement savings accounts:  401(k)  403(b)  IRAs  All of the principal and 90% of the payments from a private trust
  36. 36. Being “Judgment-Proof” If your income consists only of exempt funds and you have no assets, you could be considered "judgment proof."  Being “judgment proof” means that your creditors cannot collect money from you -- even if they have a judgment -- because all of your income and property is exempt It is important to understand that a court can still enter a judgment against you, even if you are considered "judgment proof."  You will not have to pay the judgment so long as your income remains exempt from collection  If your situation changes (for example, if you return to paid employment or win the lottery) you will have to pay the judgment from your nonexempt funds
  37. 37. Seizure of Personal Property A judgment creditor may use the Sheriff to seize personal property from you that is not exempt. Exempt property generally includes:      household goods one television one radio personal items like your wedding ring or a watch, one car provided your equity in the car is less than $4,000 If you can show that a computer or a car are indispensable to your work, they may be exempt as “tools of the trade.”
  38. 38. Seizure of Personal Property Limitations Your car can be seized only if your equity in it is greater than $4,000.  If you still owe money on the car, it is probably completely exempt from debt collection  For example, if your car is worth $10,000 but you still owe $8,000, your car would be completely exempt from debt collection  Cars that have been equipped for use by people with disabilities are exempt up to $10,000
  39. 39. Non-Exempt Personal Property It is rare for a debt collector to actually seize personal property. Personal Property that a creditor might consider seizing would be:     expensive jewelry valuable paintings high-end furnishings luxury goods Low-income individuals and the average consumer generally do not own items vulnerable to seizure, thus this is often an empty threat. Items must be worthy of fetching a good price at auction before a creditor will consider this.
  40. 40. Lien on Your Home The filing of a judgment with the clerk in the county where the real property is located automatically places a lien on your home for 10 years. If you refinance or sell your home you must satisfy the lien by paying off the debt.
  41. 41. Enforcing Judgments in Different States Sometimes a creditor obtains a judgment against you in a state where you do not live. This can happen if you have moved since the debt was incurred, if you signed a contract in another state, or if the contract specified another state for suing to enforce the contract and you were not able to get the location changed. Or, you may own property or have assets outside the state where the judgment was obtained. The creditor can go into court in the state where you now live or have assets and register the original out-of-state judgment. This means the creditor now has the right to use all the judgment remedies available in the state where you now live or have assets (the second state).
  42. 42. IMPORTANT A creditor who places a judgment lien on your property can only do so according to the rules for judgment liens in your state. It’s not unusual for creditors to make mistakes, which may make the lien unenforceable. You might have a defense against a creditor’s attempt to execute on a lien because it is too old or because it was not properly handled. You would be able to fight a lien that was placed inappropriately or too long ago. Consult with an attorney.
  43. 43. Tax Refunds Tax refunds are not exempt from debt collection.
  44. 44. The Best Resolution Protecting your exempt income and avoiding garnishment of your wages may help you keep your money out of a creditor’s hands but your best bet is to have the default judgment vacated.
  45. 45. Need Help with a Money Judgment? Call the CLARO Hotline: (716)828-8432 Thank You! This concludes the slideshow Money Judgments. Visit CLARO online at http://clarobuffalo.org/

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