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Protecting Funds from Illegal Seizure

December 9, 2010

Alarmed by the number of calls coming in dealing with the improper seizure of bank accounts containing funds which are exempt from seizure under federal law, including Social Security, disability benefits, pensions, child support and other essential income, Empire Justice staff began

looking at the issue more closely. These cases took countless hours to resolve as local advocates sought to prove that the bank accounts contained money that was legally exempt from collection. In the meantime, for days or even weeks, low-income consumers had no access to their accounts, which were oft en their sole repository for funds. While legal services program staff worked to free up their money, clients racked up overdraft fees in the hundreds of dollars.

To address this problem, Empire Justice staff helped draft legislation that would make it clear to banks which of their accounts contain exempt funds, exempting the first $2,500 in these accounts from seizure by creditors and indexing the exemption level to inflation. Empire Justice worked with our colleagues to educate legislators, the Governor’s office and other advocates about the issue. In the last days of the 2008 legislative session, the legislation - known as the Exempt Income Protection Act - finally passed the Senate, was subsequently signed by the Governor and became effective on January 1, 2009.

As a result, approximately 400,000 low-income New Yorkers a year have a base level of funds in their bank accounts protected from restraint by debt collectors.


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