Keeping a New Mexico Business Running Through an Account Restraint

The fortnight after the freeze

Rent is due. Two suppliers are waiting. There is a payroll run on Friday and the account will not release anything. A New Mexico business in that position is not thinking about New York procedure, it is thinking about surviving the month.

This page is about that fortnight, and about the fact that most of the lasting damage in these situations is self-inflicted during it.

The instrument, briefly

CPLR § 5222 permits a restraining notice to be issued by the clerk or by the judgment creditor's attorney as an officer of the court, and served on any person holding property in which the judgment debtor has an interest.

So it is served on the bank, not on you, and the bank has no discretion to decline it. That explains both the absence of warning and the uselessness of arguing at the branch.

Holding is also not the same as taking. CPLR § 5225 requires a motion, on notice to the judgment debtor, before money the debtor holds is ordered paid over. There is a gap between the freeze and the loss, and the gap has a notice requirement in it.

The two instincts, and why both are wrong

Opening a new account and redirecting the receipts

It is the first idea everybody has. It achieves a few weeks of relief and creates a problem of a different kind.

The judgment does not go away. The creditor does not stop looking, and judgment creditors have investigative tools available to them, so a new account in the same name, at a bank in the same town, feeding from the same customers, is not a hiding place. What it does is change the subject. A dispute about whether a funder is owed money is a commercial argument. A pattern of moving receipts away from a known judgment is a conduct argument, and it is much harder to stand up in front of a court.

The cost-benefit is poor in both directions: short relief, long consequences.

Going to cash

The variant for businesses that cannot face opening an account is to start operating outside the banking system — paying suppliers in cash, taking payments personally, running the business through a family member's account.

Each of those is easy to do and very difficult to explain later. If cash flow genuinely has to be restructured to keep the doors open, that is a conversation to have with counsel before it happens, not a thing to improvise and describe afterwards.

What is actually worth doing in week one

1. Get the three facts from the bank in writing. Judgment creditor's name, county, index number. Everything else follows from them.
2. Find out what the restraint has actually captured. What it reaches and what is exempt depends on the account, the holder, and where it sits. Ask specifically rather than assuming the worst.
3. Talk to your creditors and landlord honestly, early. A business that explains a freeze in week one is in a different position from one that goes quiet and misses three payments.
4. Start the New York work. The restraint rests on a judgment, and the judgment is the thing that can actually be challenged.

The judgment is the real target

CPLR Rule 5015 permits the court which rendered a judgment to relieve a party from it, on motion, on specified grounds, with the time limit depending on the ground relied on. Excusable default, the commonest ground in this area, runs within one year after service of a copy of the judgment with written notice of its entry.

Whether anything is available in a given case depends on how the judgment came about — a defended case, a default, or a confession signed at the outset — and that is established from the court file rather than from recollection.

Everything downstream rests on that judgment. It is the only place where a durable fix exists.

What to do first, from New Mexico

1. Email the bank for the creditor, county and index number.
2. Do not open a new account for the receipts. Whatever the week looks like.
3. Do not move to cash operations without advice.
4. Get the judgment pulled and read by counsel admitted in New York.

A restrained account covers the instrument, a confession of judgment covers one common route to the judgment, and how an MCA lawsuit is defended covers the case.