What It Freezes, What It Does Not, and How Long It Lasts
Restraining Notice

The frozen balance is not creditor money yet. It is debtor money under restraint, and the distance between those two conditions is where exemptions, floors and time limits do their work.

A merchant who finds the operating account frozen after an MCA ruling should read the restraint for what it covers, what it cannot touch and how long it binds, before deciding whether negotiation or motion practice is the answer. Counsel reads the notice in order to separate the reachable balance from the protected one, starting with the paper the bank received rather than the alert on the screen.

What the Restraint Reaches

The restraining notice provisions forbid the person served from selling, assigning or transferring property in which the judgment debtor holds an interest. Service follows the manner of a summons or travels by registered or certified mail, and the notice must identify the parties, the court, the date of entry and the amounts due, warning of contempt for disobedience.

A notice in the hands of the debtor locks the debtor own transfers until the judgment is satisfied or vacated, while a notice in the hands of a bank or other third party reaches debts then owed to the debtor and debts that come due thereafter, plus property held then or arriving later, for one year after service. There is a wrinkle worth keeping in view: a garnishee that withholds money owed to the debtor in an amount equal to twice the amount due renders the notice ineffective as to other property, a detail that matters where two accounts stand restrained and only one needed to hold the line.

One limit is structural. The notice may not be served on the employer of the debtor where the property sought consists of wages or salary due or to become due, because earnings are reached through a different instrument with its own floors and ceilings. In most of the files we have seen, though the sample is not scientific, the employer exclusion surprises merchants who assumed every restraint road led to the payroll account.

What the Restraint Cannot Touch

Certain money is exempt, and the required notice recites a partial catalogue that includes supplemental security income, social security, public assistance, support and maintenance, unemployment benefits, disability benefits, workers compensation, pensions public and private, veterans benefits, railroad retirement, black lung benefits and stimulus relief for individuals and families with children (a list the notice itself presents as partial, which cautions against treating absence from the catalogue as proof that funds are reachable).

Ninety percent of wages or salary earned in the last sixty days stands exempt, alongside twenty five hundred dollars of any account holding statutorily exempt payments deposited by electronic means within the last forty five days. But the floor does not help an account that holds only operating revenue, and commingled funds invite the tracing dispute a single account creates.

Two further floors guard the account before any exemption is claimed. Where exempt direct deposits arrived in the forty five days before service, the bank must leave twenty five hundred dollars unrestrained. Where the balance sits at or below ninety percent of two hundred forty times the applicable minimum wage, the account is not restrained at all and the notice is deemed void.

The Freeze Is Only as Good as Its Paperwork

A restraint on a natural person account at a bank collapses without its companion papers, because the bank account exemption procedure provides that failure to serve the exemption notice and two claim forms together with the restraining notice renders the notice void, with the bank told to leave the account unrestrained. The same voidness rule meets a sheriff execution served on a bank without the companion forms.

The bank must send the debtor the notice copy with the forms within two business days, the debtor has 20 days from the postmark to serve the completed form on the bank and the creditor attorney, the bank releases eight days after receipt unless the creditor objects, and a creditor holding proof of full exemption must release within seven days, which compresses the entire contest into a timetable that punishes anyone who treats the mail as next week business.

Objection runs through the court on motion within eight days, with a hearing seven days after service of the moving papers and an order within five days of the hearing, while the bank holds the claimed funds for twenty one days unless ordered otherwise. A creditor that disputes an exemption in bad faith faces costs, reasonable attorney fees, actual damages and a further sum not to exceed a thousand dollars, a remedy that explains why most objections arrive with facts.

Duration and Renewal Limits

A restraint served on the debtor endures until the judgment is satisfied or vacated, with no calendar expiration to wait out. A restraint served on any other person expires one year after service, unless sooner satisfied or vacated.

Leave of court is required.

A second notice on the same person for the same judgment needs judicial permission, and a natural person bank account may receive no more than two per year from the same creditor. The precise interaction of overlapping restraints is something counsel must measure rather than assume. I have yet to see a bank question a third notice on its own initiative, which leaves policing the cap to counsel.

Counsel Review and Outside Negotiation

The account records decide more than the arguments do. Counsel will review the statements for the source of each deposit, identify the exempt entries and the floors that apply, and construct a claim supported by award letters, pay stubs and two months of bank records rather than by assertion alone. Whether the legislature intended this balance or merely failed to prevent the alternative is a question worth considering.

Decisions the merchant makes, or avoids making, in the first days after the freeze decide whether counsel can still protect and preserve the funds the statute exempts. Independent counsel ensures the forms reach both addresses within the 20 day window and ensures no statement about the source of funds goes to the creditor without review. Resist the urge to explain the deposits by phone, even briefly, because any description offered casually can be used against the merchant later, so the merchant should simply let counsel characterize the funds. Rarely does a frozen account thaw on courtesy alone. Delancey Street, a settlement company and not a law firm, offers a free confidential initial review of restrained MCA accounts and coordinates with independently licensed counsel for exemption claims and negotiation, on a timetable that is extremely tight and under a procedure peculiar in its precision.