Restraining Notice on a Bank Account: What It Freezes, What It Leaves Alone, and How Long It Lasts

A frozen balance proves nothing except the existence of a paper. The account holder who reads that paper before answering it holds every advantage the statute offers.

1. Obtain the Notice the Bank Received

The bank acts on the paper it received, and no phone call alters the instruction. New York CPLR 5222, the restraining notice statute, permits issuance by the court clerk or by the creditor attorney as an officer of the court, served personally in the manner of a summons or by registered or certified mail with return receipt requested. Creditors serve the bank first in order to freeze funds before the debtor can respond. The peculiar silence of a restraint is that the owner learns of it last.

Simply ask the bank for the complete document and the date of receipt. Match the case number, the named debtor, and whether the account described in the notice is the account the bank froze. The customer portal shows a balance without showing the authority behind it.

Identify whether the restrained account belongs to an individual or to a company. A judgment against one never answers the status of property associated with the other. Within four days of service on the bank, except where the natural person procedure of section 5222-A applies, the creditor must mail or deliver the statutory notice to each natural person debtor.

2. Determine What the Restraint Reaches

Before the owner sees the alert, before the bank explains itself, the restraint is already in force. Section 5222 reaches property and debts then held by the garnishee and property and debts later coming into the garnishee hands, including anything specified in the notice. Where the garnishee withholds money equal to twice the amount due on the judgment, the notice loses effect as to other property and money. The question moves from the size of the freeze to the arithmetic of the judgment ledger.

The statute shelters certain account funds without any claim being filed. Where electronic exempt payments reached the account in the forty five days before service, the bank must leave two thousand five hundred dollars unrestrained, and where the account holds no more than that sum the notice is deemed void. A separate floor protects an amount tied to two hundred forty times the applicable minimum hourly wage, except as a court orders otherwise. The money is in the account. It is also beyond reach.

A creditor who restrains first and reads the exemption procedure later has reversed the order the statute prescribes. Rarely does a phone call release a restraint. An extremely careful file retains and files the bank explanation of the amounts held and the amounts released.

3. Follow the Natural Person Exemption Procedure

The exemption procedure belongs to natural persons. CPLR 5222-A, the exemption claim procedure for bank accounts, requires the issuing party to serve the bank with an exemption notice and two exemption claim forms, and failure to serve them together with the restraint renders the restraint void. The bank then serves the debtor with the papers by first class mail within two business days.

To claim the exemption, the debtor completes both forms, signs under penalty of perjury, and serves one on the bank and one on the creditor attorney within 20 days of the postmarked date on the envelope. The claim form functions the way a train ticket functions when the conductor never walks the aisle: valid, unexamined, and decisive only if someone asks to see it. The postmark on that envelope starts the twenty day period.

And the bank holds the funds while the procedure runs. Eight days after the postmark on the executed form mailed to the bank, or after personal delivery, the bank releases all funds in the account and the restraint is deemed void, unless the creditor objects within that time. Where the form arrives with proof that every dollar is exempt, the creditor must instruct release within seven days. Nobody frames the exemption notice. Everyone should read it.

Document the Source of the Funds

Proof means award letters, checks, check stubs, and bank records showing the last two months of account activity. Where the account mixes exempt and unknown funds, the creditor applies the lowest intermediate balance principle and releases the exempt money within seven days. What the debtor discloses, or withholds, with the claim form shapes the creditor response. Do not describe business receipts as wages to fit a category, since a false statement in the form can be used against the debtor later. Counsel should identify the legal basis and then collect and assemble the records supporting it.

4. Duration and the Second Notice Rule

Two clocks govern one restraint. A debtor served with the notice is forbidden to transfer property, even briefly, until the judgment is satisfied or vacated. A person other than the debtor is bound until one year after service, or until satisfaction or vacatur, whichever event first occurs. That decides the next year.

Leave of court is required to serve more than one restraining notice on the same person for the same judgment. A creditor may serve no more than two restraining notices per year on a natural person banking institution account. There are files where repeat service draws no objection, though in practice the papers rarely show why. Keep the envelope.

5. Address the Restraint Before Discussing Settlement

Delancey Street offers a free confidential initial review for an MCA account affected by collection. The company provides debt settlement services, with independent counsel handling legal matters under the appropriate engagement. It is not a law firm.

Ask the adviser to ensure the proposal identifies the existing restraint and the funds it holds. Counsel should ensure any release, exemption application, or court response receives the required legal treatment. An extremely favorable reduction leaves the business unable to operate if the agreement says nothing about the funds still restricted, which, in our reading, is the most common defect in these proposals.

Resist the urge to treat a settlement conversation as a release. Private negotiation creates no stay, and a documented change in the restraint is the only event that restores the account. The ledger decides what the business can spend, long after the alert has faded.