3 Stages of a Restraining Notice and Where You Can Intervene
New York CPLR

The money in a restrained account belongs to the merchant until a court says otherwise. A restraining notice decides who may touch it, and that decision moves through three stages, each with its own point of entry for counsel.

This article concerns New York practice under the statutes that govern enforcement of money judgments, the setting in which an MCA funder pursues a merchant who stopped paying. Delancey Street appears in this picture as a settlement company, not a law firm, and the legal moves described here belong to independent counsel. The business decision belongs to the merchant, made after counsel has read the paper the bank received.

Issuance and Service

The restraint begins as paper signed by someone the court trusts. The clerk of the court or the attorney for the creditor, acting as an officer of the court, may issue the notice: no judge reviews the freeze before it lands on the account. The restraining notice provisions require the paper to name the parties, the court, the date of entry, and the balance claimed due, warning of contempt for disobedience.

Service travels in the manner of a summons or by registered or certified mail, and where the notice reaches a bank holding a natural person account the creditor faces a yearly ceiling of two restraining notices, a limit that exists because repeated freezes on the same account punish without collecting, and a creditor that wants a third freeze in the same year must ask a judge for leave. The ceiling has teeth.

A repeat notice on the same judgment needs the same leave of court. Where the interest rate shifts mid restraint, the creditor must issue an amended notice without leave, dating the new rate. Counsel reviews and analyzes these service details to test the restraint at its root, because a notice outside the manner the statute requires restrains nothing.

Rarely does the bank check any of this. Our files suggest defective service is more common than creditors admit, though our files are not a survey. Every later challenge grows harder once money has moved.

Effect of the Restraint

Not every dollar in the account answers to the freeze. Once served on the debtor, the notice forbids sale, assignment, transfer or interference with property in which the debtor holds an interest, until the judgment is satisfied or vacated. Served on a third party, it has effect where the person owes the debtor a debt or holds property believed to be the debtor, reaching later arriving property and debts for one year. Interest accrues on the frozen balance the way moss gathers on stone, without permission and without pause.

Beneath the freeze the statute sets floors the bank must observe. Where exempt payments by direct deposit entered the account in the forty five days before service, the bank must leave two thousand five hundred dollars unrestrained, and where the balance sits at or below that line the restraint is deemed void. A second floor, measured as two hundred forty times the applicable minimum wage, shields the amount necessary for the reasonable requirements of the debtor and dependents. No fee may be charged for a restraint the bank had no authority to impose.

The bank holds the money. The creditor owns the judgment. Neither controls the outcome until the exemption forms return with answers.

The notice itself recites a partial catalogue of exempt money: benefit payments, support and maintenance, pensions public and private, and ninety percent of earnings from the last sixty days. The catalogue is extremely specific and extremely easy to ignore. The notice, if we are being precise, restrains transfer rather than ownership, a distinction that matters when debtors act on it. Most creditor attorneys count on delay in order to let the twenty days run. The procedure rewards the opposite response, and the reward is measured in days.

The floors amount to a peculiar mercy. They hold for every debtor who claims them in time, and for no one else. Whether the legislature built them from mercy or from a wish to keep collection dockets moving is a question worth keeping open.

The Forms and the Calendar

Within four days of serving a third party restraint, the creditor must mail or deliver a copy with a plain language warning to each natural person debtor, in an envelope marked personal and confidential. The bank, within two business days, forwards the exemption notice and claim forms to the last known address. The debtor completes both copies and returns one to the bank and one to the creditor inside twenty days of the postmark, and the bank releases the funds eight days later unless the creditor objects by motion. Speed matters more than force at this stage. Counsel counts from the postmark and ensures the window is calendared. How often banks miss that forwarding deadline is not published anywhere we have looked. No judge approved the freeze before it landed, and none approves its continuance unless someone asks.

A missed claim deadline does not waive the exemption, but it leaves the money frozen while counsel moves to protect and preserve the balance through slower remedies.

Review Before the Balance Moves

And none of this procedure decides the underlying debt. A void restraint can coexist with a valid judgment, and a released account can face a second freeze, better papered, within weeks. Counsel treats each defect as material for negotiation rather than as victory, because the creditor keeps every other tool the statutes provide. Resist the urge to telephone the creditor before counsel has read the file.

I have yet to see a file where ignoring the forms improved the outcome. The moves a merchant makes, or does not make, after the freeze shape both the court case against the merchant and the settlement talks running alongside it. Delancey Street, a settlement company and not a law firm, opens those talks with a confidential settlement review at no charge, while independent counsel handles the filings and objections, and prepares the merchant for any hearing. Simply bring the notice, the forms, and recent bank statements to the first conversation, and ensure nothing is signed in the meantime, even briefly, without counsel present.

Restraint practice rewards readers. The merchant who reads the paper the bank received, counts the days on the postmark and claims what the law protects negotiates from a position the creditor recognizes. The window is extremely short, which is why counsel starts counting at the postmark. That recognition, more than any form, is what moves a frozen file toward settlement.