Articles Posted in Collections

When a creditor obtains a judgment against a debtor in New York the judgment creditor will typically seek to enforce the judgment and recover money to satisfy the judgment. This topic is covered in prior Blog posts and on the Frequently Asked Questions (FAQs) on our web site.

A common method of enforcement of a judgment is by a writ of execution against the judgment debtor’s bank account or a wage garnishment. This is accomplished with the assistance of a New York City Marshal in New York City or County Sheriff.

When the Marshal or Sheriff receives a judgment for enforcement they add five percent (5%) to the amount of judgment as their fee. This statutory fee is called “poundage”. For each $1 the Marshal or Sheriff recovers from the judgment debtor they cut 5ยข. However, the total amount of the judgment is also increased by 5% to account for poundage.
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As the recession continues many people are having trouble paying their bills even if they have a job. A common question we get from employees in Manhattan and other surrounding areas is whether the employer gets notified if there is a wage garnishment.

When a creditor obtains a judgment against a debtor in New York the judgment creditor will typically seek to promptly enforce the judgment and recover money to satisfy the judgment. This topic is covered in our prior Blog posts and on the Frequently Asked Questions (FAQs) on our web site.

A common method of enforcement of a judgment is by a wage garnishment. This is accomplished with the assistance of a New York /City Marshal in New York City or County Sheriff. Up to ten percent (10%) of a judgment debtor’s wages (25% in any pay period, not exceeding 10% per year) can be garnished.
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If you default on credit card debt typically your credit line will be cancelled if the default is not promptly cured. Usually your account will be turned over to the internal collection department of the creditor. They will call you (frequently — often daily if not more) and send you letters about the past due debt. They may offer you a discount for a single lump sum payment or payment of an agreed reduced amount in 2-3 payments (perhaps longer).

The next stage is that the debt will get turned over to an outside debt collection agency. This is a company that specializes in collecting past due debts. They usually have a stable of collectors who are employed on a primarily contingency basis — meaning the collector’s salary is directly tied to his or her ability to collect money from you.. Many collection agencies — particularly in New York employ what has become to be know as the “Buffalo” style of collections (named after the collections agencies in that city that often utilize this style). The Buffalo style of collections is very aggressive and confrontational. Even if an individual collector does not engage in blatant violations of the Fair Debt Collections Practice Act (FDCPA) by engaging in prohibited debt collection activities — they often will create an artificial atmosphere of fear, uncertainty and urgency. For example, it would be a clear violation of FDCPA for a debtor collector to state “If you don’t pay this debt you will go to jail” — since that statement is false (we have not had debtors prison in the U.S. since the 1800s). However, a Buffalo style collector may intimate unspecified dire consequences intended to elicit fear and anxiety in the debtor, such as “I wouldn’t want to be in your shoes if you don’t pay this debt by the end of the month.” When the debtor inquires what will happen the collector might respond vaguely, such as “It’s not good” or “You’ll fine out if you don’t pay.”
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Many of our clients and prospective clients have a very limited knowledge concerning their rights when they owe a judgment. Collectors and collection agencies manipulate people’s fear — they use intimidation and the knowledge that most people in New York do not record their telephone calls to intimidate people with blatant lies, or if not blatant lies then insinuating vague and unspecified negative consequences (such as “I would not want the NYC Marshal coming to my apartment if I owed a judgment.”).

The New York City Marshals’ Handbook of Regulations (available online at provides an extensive explanation of what a NYC Marshal may and may not do to enforce a writ of execution with respect to a judgment.
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As a law firm involved in commercial debt collection and debtor-creditor matters in the New York metropolitan area (Manhattan, Brooklyn, Queens, etc.) and New Jersey, this is an issue that we face a lot. The answer, like many things involving the law, is that is depends on the facts involved. It is easier to answer to the question by describing what is not allowed.

1. What is Usury and When is a Loan Usurious?

New York makes it illegal to charge interest exceeding eighteen percent (16%) per year on loans up to $250,000. This works out to a monthly rate of one and a half percent (1.33%) per month. If a contract provides for interest above this amount it is void and unenforceable, unless it is subject to an exception. For example, credit cards and car loans issued by national banking associations (they usually have “N.A.” after their name) are subject to an exception contained in federal law that exempts them from this restriction. (It doesn’t make sense that you are subject to this restriction and the bank are not — but the banks have better lobbyists than you do.)
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Consignment arrangements are very common in certain industries that are active in New York City, such as for sale of jewelry, fine art and antiques. In a consignment transaction the consignor (owner) of the merchandise gives it on consignment to the consignee for resale. The consignee does not have to pay the consignor until the goods are actually sold and the consignee has received payment. Some common example of this are a wholesale jeweler who consign loose stones or jewelry to a retail jewelry store, an artist who consign a painting to an art gallery, or an antique furniture owner who consign it to an antique shop for resele.

1. What is a consignment?

Under a consignment arrangement the consignor retains title and ownership of the consigned goods until they are sold by consignee. Unlike a regular sale the consignee does not have an obligation to pay for the goods until they are actually sold. In addition, in a consignment arrangement if the goods do not sell the consignee can usually return them to the consignor. The goods received on consignment do not form part of the assets of the consignee โ€“ and remain property of the consignee.
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When a borrower/debtor owes money to a bank and also has money on deposit with the bank, the bank has a right to setoff the debt owed to it against the funds on deposit. This right is based on the contract with the bank the debtor signed when he or she first opened the account as well as the general common law.

1. How does a bank setoff work?

Setoff means that the bank has the right to offset the debt owed to it against the funds it holds on deposit in any account of the debtor, including checking, savings, money market, and certificates of deposit (CDs). The bank is not required to provide advance notice to the debtor of its intention to exercise its right of setoff. The bank deducts the funds from the debtor’s account and credits them against the debt owed to the bank. Once the bank has setoff the debtor’s funds against the debt owed to the bank this may cause the debtor’s account to overdraft because the account will have insufficient funds to cover outstanding checks after the bank has setoff. For people whose paycheck is directly deposited to their bank, an additional problem is that they can find their funds swept up by the bank on an ongoing basis for more than one pay period.
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A common question we get is “How long will a judgment stay on my credit report in New York.”

A judgment stays on someone’s credit report for seven years. However, even though a judgment may no longer appear on someone’s credit report, that does not mean that the judgment is no longer enforceable. A judgment in New York is valid for twenty years. During that time it can enforced against a judgment debtor’s income and assets.
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We often receive inquiries from people living in New York, Queens, Bronx, and Brooklyn that a collector or collection agency has frozen their bank account, and wondering what they should do.

Collectors and collection agencies can’t freeze bank accounts. They have only two tools in their tool belts: letters and calls. However, in New York lawyers can and do freeze bank accounts. The way they do that is to get a judgment on behalf of their creditor client and then issue a restraining notice. Large collection law firms routinely issue restraining notices electronically to all the major banks.
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Many people don’t learn that a judgment has been entered against them until a bank account gets frozen or their wages get garnished. This is typically because they ignored legal papers they received (such as a summons and complaint), or they were never actually served.

If a debtor owes money for a consumer debt (i.e., debt for personal, family or household purposes) he or she is supposed to be sued in the county where the contract was signed, or in the county where he or she lives. In Continue reading

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