Lien, Garnishment & Levy

After a creditor, or its debt collector, gets a judgment against you for unpaid debts, they are then referred to as the “judgment creditors.” There are several ways the judgment creditor can try to collect on that debt.  Two common ways are by filing on the land records, a written document called a lien or by attaching your wages with a “garnishment.”  A lien is a security interest given to the judgment creditor over your property, such as a house or a car. A garnishment allows the creditor to collect on the judgment debt directly from your wages or other compensation. There is a third way the judgment creditor can come after you to try and collect your alleged debt. A levy is a taking of money by legal process through seizure and sale of property. 

Lien 

Your creditor, or its debt collector, can place a lien on your property as soon as it becomes the judgment creditor (as explained above) in order to secure repayment of a debt. The lien is generally recorded by the judgment creditors’ on the land records at the local county office. Liens can be imposed in several situations (or the Department of State in certain instances, for example, in the case of a cooperative apartment debt).  Liens can be used to obtain payment on a money judgment for back taxes or for attorney’s fees. 

When a lien is put on your property, it does not mean that the creditor will get paid right away or will get paid in full, or even at all. Instead, the lien gives the creditor the right to receive a portion of any money you would receive if the property is sold or refinanced. If you do not ever sell the property, the lien may not result in a payment of any money to the creditor. 

Also, even if property is sold or refinanced, your creditor may not get paid in full, or at all, depending on what other liens are already on the property, if, for example, it was recorded before that creditor filed its lien on the land records.  Some creditors get priority over other creditors and must be paid first.  Sometimes, this leaves little or no money to pay the other lien-holders, and they will have to find some other way of collecting on the debt. 

Garnishment 

If you are employed and are unable to pay a debt or a money judgment, the court can order that your wages be “garnished.”  This means the money to pay the debt will be taken from your paycheck and paid directly to the creditor.  A garnishment is a common way to get you to pay overdue court fines or judgments, child support or for back taxes. 

There are laws that protect you if your wages are garnished.  For instance, the Consumer Credit Protection Act (CCPA) prohibits your employer from firing you due to the wage garnishment, unless you have been garnished for more than one debt.  It also limits the total amount of your earnings that can be garnished in one week.  In general, garnishment is limited to 10% of your gross income. However, if the garnishment is to pay delinquent child support, 60% of your income may be garnished. 

If you need your whole paycheck to pay for the basic support of yourself and your family, you can file a form with the court to try to stop the garnishment. Also, filing bankruptcy can usually stop garnishments for most debts. 

Levy 

A levy is a legal order requiring a third party, usually your bank, to remove money from your account and turn it over to the judgment creditor or collection agency that has the judgment against you.  To remove the levy, you must either pay the bill in full or show that the funds in the account are exempt. 

New York is one of the few states that protects your bank account by requiring the judgment creditor and the bank to take certain steps before your bank account can be levied or restrained.   The New York’s Exempt Income Protection Act (EIPA) sets a minimum baseline balance that is not subject to a freeze or levy by the judgment creditor.  This baseline amount is currently set at $1,920 per banking institution.  The protected amount goes up to $2,625 if the account includes directly deposited government benefits and other types of income that are exempt from creditors such as Social Security, unemployment insurance, child support payment and alimony. 

The EIPA also requires the bank to analyze the funds in your account to make sure it does not contain exempt funds.  It also requires the judgment creditor to issue exemption forms to the bank to give to you, and to appropriately address any claimed exemptions. 

Certain types of funds are exempt from restraint or levy.  These funds include: 

• Supplemental security income (SSI) 
• Social security 
• Public assistance (welfare) 
• Spousal support, maintenance (alimony) or child support 

• Unemployment benefits 
• Disability benefits 
• Worker’s compensation benefits 
• Public or private pensions 
• Veteran’s benefits 

• 90% of your wages or salary earned in the last 60 days 
• Railroad benefits 
• Black lung benefits 

If a judgment creditor levies a bank account containing exempt funds, you may be able to get the money back.  The court has a free form that can be used for this purpose called an Exemption Claim Form. 

Legal Editor: Marshal Coleman, Esq., July 2015 (updated March 2018)