New York Judgment Enforcement: 6 Things a Creditor Can Seize and 4 They Cannot

What Changes the Day the Judgment Is Docketed

Enforcement in New York is deliberately fast and mostly clerical. Once a money judgment exists, CPLR 5201(b) opens up any property that could be assigned or transferred, present or future, vested or not, unless something specifically exempts it. That is a wide net by design, and most of what happens next requires no judge: the creditor’s own attorney issues the restraining notice, the clerk or that attorney issues the execution, and the sheriff or marshal does the rest. The judge only reappears if you bring the fight back to court.

So the useful question is not whether a judgment is serious. It is which of the six tools below actually reaches your particular assets, in what order they tend to get used, and how long each one stays alive. A funder with a fresh judgment against a trucking company goes after the operating account and the trucks. The same funder against a staffing firm goes after receivables, because that is where the value sits. Knowing which lane your business is in tells you what has to be protected first and what your counsel can realistically negotiate around.

The second half of this page is the part most owners get wrong in both directions. Some assume everything is gone; others assume the exemptions they read about protect the company. Neither is right. The exemption sections in the CPLR were written for natural persons, and a business operating account gets almost nothing out of them, while the genuine limits on a creditor come from ownership, from the marshal’s restricted authority, and from a cap on how much can be held at once.

1. Cash in the Business Operating Account

The account is target number one because it is the only asset that converts to the creditor’s money without a buyer. Two devices do the work in sequence. A restraining notice under CPLR 5222 freezes; a levy under CPLR 5232(a) takes. The notice can be issued by the clerk or by the judgment creditor’s attorney as an officer of the court, it binds a garnishee such as your bank for one year, and the garnishee can stop restraining once it is holding twice the amount due on the judgment. The levy is a separate step, made by serving the execution on the bank in the same manner as a summons, and it goes void as to anything not turned over after ninety days unless the court extends it or a turnover proceeding is brought.

Two details decide how much your funder actually collects. First, the safeguards most people have read about do not apply here: CPLR 5222-a, with its notice-and-claim procedure and the exemption forms the bank has to mail, governs an account of a natural person, so an LLC or corporate operating account is processed without any of that. Second, under Aspen Industries, Inc. v. Marine Midland Bank, 52 N.Y.2d 575 (1981), a restraining notice creates no lien and the bank’s own right of setoff is superior to it, meaning your bank can apply the same dollars to its own loan before the judgment creditor sees them.

If a freeze has already happened, the sequence for getting money released is its own project, and it is set out in detail on our page covering the CPLR 5222 restraining notice along with the practical steps in our guide to getting a frozen business account unfrozen. What matters at the planning stage is simpler: opening a new account somewhere else is not a strategy, because an information subpoena under CPLR 5224 gets answered in seven days and refusing to obey either the subpoena or the restraining notice is punishable as contempt under CPLR 5251.

2. Receivables and What Your Customers Owe You

For most service businesses the receivables ledger is worth more than everything in the yard, and New York gives a judgment creditor two clean ways at it. CPLR 5232(a) allows a levy by serving the execution on a garnishee who owes a debt to you, which for a staffing firm or a subcontractor means the general contractor or the client. CPLR 5227 goes further: on a special proceeding against any person shown to be or about to become indebted to the judgment debtor, the court may direct that person to pay the creditor the debt as it matures, and may enter judgment against that person if they refuse.

The reason this hurts more than the dollar amount suggests is what it does to the customer relationship. Your client receives a court paper telling them not to pay you and to pay a funder instead, backed by CPLR 5251, which makes refusal or willful neglect to obey a subpoena or restraining notice a contempt of court. Nobody in accounts payable wants that on their desk. Some clients quietly stop awarding new work, which is the part of enforcement that shows up in next quarter’s revenue rather than in this month’s bank statement.

There is a layer underneath this that changes who wins. If the funder also filed a UCC-1 covering your accounts, it may have a perfected security interest and rights to notify account debtors independent of any judgment, and a secured creditor with priority can outrank a later judgment creditor levying on the same receivables. Untangling which creditor is actually entitled to a given payment is a lien priority question, and it is worth resolving before you tell a customer anything, because guessing wrong exposes you twice.

3. Equipment, Inventory, and Rolling Stock

Tangible property is taken by physical seizure. Under CPLR 5232(b) the sheriff levies on personal property capable of delivery by taking it into custody, without interfering with the lawful possession of pledgees and lessees, and then serves a copy of the execution on whoever had the property. The execution itself is issued under CPLR 5230 by the clerk or by the creditor’s attorney, it has to be returned within sixty days of issuance unless it has been served, and that return period can be extended in writing in further periods of not more than sixty days each. Sale follows CPLR 5233, at public auction, with printed notice of time and place posted at least six days before the sale in three public places in the town or city where it will be held, or advertised in newspapers in New York City.

From the creditor’s side this is the least efficient tool on the page, and that is worth knowing. A six-year-old box truck sold at a sheriff’s auction brings a fraction of what it would bring in a private sale, and the creditor pays poundage on top: under CPLR 8012(b) the sheriff is entitled to five percent of the sum collected in New York City, and five percent on the first $250,000 plus three percent on the balance elsewhere. That inefficiency is exactly why a seizure threat is often a negotiating posture rather than a plan, particularly where a lender already holds a perfected first position on the same equipment.

It is also the tool that stops your revenue instantly, which is why it deserves attention out of proportion to what it yields. A restaurant without its walk-in or a contractor without a skid steer is not operating, and a business that is not operating cannot fund a settlement. That argument, made properly and early by counsel who does this work, has real purchase with a funder that would rather have payments than a used forklift. Our overview of MCA defense lawyers in New York covers who handles that conversation.

4. Real Property Titled in the Company Name

Real estate is the slowest tool and the one with the longest memory. Docketing the judgment with the clerk of the county where the property sits creates the creditor’s priority: under CPLR 5203, no transfer of the judgment debtor’s interest in real property is effective against the judgment creditor from the time of docketing until ten years after the filing of the judgment-roll. Nothing has to be seized for that to happen, and nothing announces itself. Owners typically discover it when a title report comes back on a refinance or a sale that was supposed to close in three weeks.

Actual liquidation runs through CPLR 5236, and the timetable is long and strictly noticed. Notice of sale must be posted at least fifty-six days before the sale in three public places in the locality, published in a newspaper at least once in each of four periods of fourteen successive days, and served on the judgment debtor and on parties holding recorded interests at least thirty days before, with the sale itself held between the fifty-sixth and the sixty-third day after the first publication unless the court extends it or the sheriff postpones. Every one of those steps is a place where a defective sale can be challenged.

For most of the businesses we see, the practical effect is the lien rather than the sale. A funder rarely wants to run a sheriff’s auction on commercial real estate encumbered by a first mortgage, because it takes the property subject to that mortgage and the equity math usually does not work. The lien, though, does exactly what the funder wants: it freezes your ability to refinance or sell, which is often the only source of the money a settlement would require. Getting a docketed judgment satisfied and the lien released should be written into any resolution, not left as a follow-up.

5. Your Membership Interest and Its Distributions

An ownership interest is property, and CPLR 5201(b) reaches any property that could be assigned or transferred whether or not it is vested. For a New York LLC the mechanism is the charging order at Limited Liability Company Law §607: on application by any judgment creditor of a member, the court may charge that member’s interest with payment of the unsatisfied amount of the judgment with interest. Once charged, the creditor stands in line for money that would otherwise flow to the member, and the practical consequence is that your distributions are intercepted while the judgment is outstanding.

Section 607 also draws the boundary that owners misread most often. A creditor who obtains a charging order has only the rights of an assignee of the membership interest. It does not become a member, it does not vote, it cannot force a distribution that the operating agreement does not require, and it does not get to reach the company’s assets to satisfy a member’s personal judgment. That is a meaningful limit, and it is the reason a personal judgment against you does not automatically become a judgment against the entity you own.

The limit runs the other direction too, and this is where owners get hurt. Where the judgment is against the operating company itself, the charging order framework is irrelevant and the creditor is going straight at the company’s own accounts, receivables and equipment. And where distributions have been recharacterized as something else, for example a member drawing money as a loan repayment or as compensation routed through another entity, a creditor can bring a turnover proceeding under CPLR 5225(b) against whoever holds the money or received the transfer. Structure that exists only on paper does not survive that proceeding.

6. Ten Percent of a Guarantor’s Pay

If you personally guaranteed the advance and a judgment was entered against you individually, your salary or draw from the business is reachable, but only at the edges. CPLR 5205(d)(2) exempts ninety per cent of the earnings of the judgment debtor for personal services rendered within sixty days before, and at any time after, an income execution is delivered. That leaves ten percent, and CPLR 5231 confirms the ceiling from the other direction by allowing an income execution for installments of not more than ten percent of the earnings. Within twenty days after the income execution is delivered to the sheriff, the sheriff serves a copy of it on you.

There is a floor as well as a ceiling. Nothing may be withheld for a week in which your disposable earnings do not exceed the greater of thirty times the federal minimum hourly wage or the applicable state figure, which means a low-earning week produces nothing for the creditor. Where multiple income executions are outstanding against the same debtor, CPLR 5231 has them satisfied in the order in which they were delivered to an officer authorized to levy, so a second funder that shows up later waits behind the first.

Two traps sit inside this item. Cutting your own salary to nothing to defeat an income execution does not make the money disappear, it converts it into whatever you took instead, and distributions or shareholder loans routed around a payroll are reachable through the charging order and turnover routes in item 5. And if the judgment is against the company rather than against you personally, the income execution has nothing to attach to, which is one of the practical reasons the presence or absence of a personal guarantee changes the entire enforcement picture.

And 4 Things They Cannot Reach

The four limits below are the ones that hold up in practice. They are not loopholes and none of them is a reason to feel comfortable, but each one has stopped a collection effort we have watched play out, and knowing where the boundary sits is what keeps a negotiation honest.

First, property the judgment debtor does not own. Enforcement runs against the debtor named in the judgment, and CPLR 5201(b) reaches that debtor’s assignable interests. A judgment against your LLC is not a judgment against you, and a judgment against you is not a judgment against a separate company you happen to also own. Creditors have exactly two documented ways across that line, and both require proving something rather than asserting it. One is piercing the corporate veil, which in New York generally requires showing complete domination of the entity together with use of that domination to commit a wrong causing the plaintiff’s injury, a standard courts describe as difficult to meet. The other is a voidable transaction claim under Debtor and Creditor Law article 10, where §273(a) reaches transfers made with actual intent to hinder, delay or defraud and also transfers for less than reasonably equivalent value while the company’s remaining assets were unreasonably small, and §278 gives the creditor four years, or a year from discovery if that is later.

That boundary is also where owners do the most self-inflicted damage. Paying personal expenses out of the company account, moving equipment to a new entity without documented consideration, or running two businesses out of one bank account hands a creditor the facts it needs for both theories at once. Separate books and arm’s length transactions are the defense, and they only work if they existed before the trouble started.

Second, the statutory exemptions, with a caveat that matters more than the exemptions themselves. CPLR 5205 and 5206 are written for a natural person: 5205(a) lists household furniture and appliances, a sewing machine, books, domestic animals with their food, jewelry and art up to a capped amount, tools of trade, a motor vehicle and a general wildcard, and 5206 exempts a homestead and a burial ground from application to the satisfaction of a money judgment. Those provisions do real work for an individual guarantor. They do almost nothing for a business, because a corporation is not a natural person and no part of 5205(a) describes commercial inventory, a payroll account, or a fleet. The same asymmetry runs through the account protections: 5222-a and the exempt-deposit floors it enforces apply to an account belonging to a natural person, which is precisely why a levy on a company operating account happens with no exemption notice at all. Personal exemption figures also change, so any number you plan around should be confirmed against the current version of the statute rather than an article.

Third, everything a New York City marshal is not permitted to do. Marshals are not sheriffs, even though they enforce many of the same judgments in the five boroughs. Under §1609 of the New York City Civil Court Act, city marshals have no power to levy upon or sell real property and no power of arrest, while otherwise carrying the powers and duties of sheriffs in respect to the taking and restitution of property. If a marshal has your accounts or your equipment, the marshal cannot touch the building, and nobody in this process can arrest you for owing money on a civil judgment. Marshals also keep records of their official acts, fees and income that are open to inspection by the appellate division, which is a genuine accountability route when fees or a levy look wrong.

Fourth, more than the cap. A restraining notice does not authorize an open-ended freeze: CPLR 5222(b) provides that once a garnishee served with the notice is withholding money in an amount equal to twice the amount due on the judgment, the notice is not effective as to other property or money. On a $60,000 judgment that is $120,000, which is generous to the creditor and infuriating to a business owner, and it is still a ceiling rather than a license over the whole account. Amounts held past that point, or a second bank restrained after the first is already holding twice the judgment, are the kind of overreach that gets fixed by motion, and CPLR 5240 gives a court authority to make an order denying, limiting, conditioning, regulating, extending or modifying the use of any enforcement procedure.

Who Should You Call? Our Top-Rated Business Debt Firms

One firm on this list works the entire lifecycle of a business debt file, from stopping the daily debits through attorney-led negotiation, UCC lien removal, and a signed release. The other two cover broader debt categories that often sit alongside the advances. Choose accordingly.