Debt Collection Lawyer in New York City

What a debt collection lawyer does

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A debt collection lawyer demands payment, sues on unpaid invoices, notes and guaranties, finds and freezes a debtor's assets, enforces judgments, and defends businesses and guarantors sued over debts. Collection cases are part of the firm's commercial litigation practice in New York State Supreme Court (including the Commercial Division), the federal courts in Manhattan and Brooklyn, and arbitration when a contract requires it.

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Do you need a lawyer? Not always for a first demand letter. But a corporation must appear in court through an attorney, apart from limited exceptions such as small claims and commercial claims parts (CPLR 321(a)).

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How to collect unpaid invoices before you sue

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To collect an unpaid invoice in New York, gather the paperwork, send a written demand with a deadline, get any promise to pay in writing, and sue in time if the customer still does not pay. Most such claims are breach of contract claims.

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• Gather the contract or purchase orders, invoices, delivery records, payment history and messages about the bill.

• Send a written demand stating the amount, the basis and a date to pay.

• Get any promise to pay signed. A spoken promise does not extend the deadline to sue, but a signed written acknowledgment or new promise can (General Obligations Law § 17-101).

• Check whether the customer can pay: does it still operate, own property, hold accounts or receivables, or have a guarantor?

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Deadlines: a suit on a business contract, including unpaid invoices for services and business loans, generally has six years (CPLR 213(2)). A suit against an individual on a consumer credit debt has three years, and once that time runs out, a later payment or promise does not revive the claim (CPLR 214-i). Invoices for a sale of goods have four years from the breach, which the contract can shorten to no less than one year but cannot lengthen (UCC § 2-725).

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Interest: on a contract claim, interest runs from the date the claim arose, or from each later date an amount came due, such as each invoice (CPLR 5001). A rate set in the note or contract applies before default, and generally until judgment if the contract says so, including a post-default rate. Otherwise the rate is 9% a year, or 2% on a consumer debt where an individual is the defendant (CPLR 5004).

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Suing on a note or guaranty: summary judgment in lieu of complaint

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Summary judgment in lieu of complaint is a New York shortcut for suing on an instrument for the payment of money only, such as a promissory note or an unconditional guaranty of payment, or on a judgment. The creditor serves a summary judgment motion with the summons instead of a complaint (CPLR 3213).

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The test is whether the document, plus proof of non-payment, makes out the claim. If outside proof is needed beyond simple non-payment or a similarly minor matter, the shortcut fails. The case then typically continues as an ordinary lawsuit (Weissman v. Sinorm Deli, Inc., 88 N.Y.2d 437 (1996)).

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An unconditional guaranty of payment usually qualifies. An "absolute and unconditional" guaranty can bar defenses the guarantor expressly waived (Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A. v. Navarro, 25 N.Y.3d 485 (2015)). Which defenses survive depends on the guaranty's words.

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The return date must give the defendant at least its time to appear (CPLR 320(a)). See the firm's plain-language guide to summary judgment.

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Freezing assets before judgment

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A court can order attachment, which holds a defendant's property while a suit for money is pending, but only on grounds listed in CPLR 6201. Two come up most. The defendant is not domiciled in New York and lives outside the state, or is a foreign company not qualified to do business here. Or, to cheat creditors or defeat a judgment, it has hidden, moved or encumbered property, or is about to.

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The creditor must also show by affidavit that it will probably win and that its demand exceeds any counterclaims it knows of. It must post a court-set bond (an undertaking) of at least $500. If the defendant wins or the attachment proves unjustified, the creditor owes the defendant's costs and damages, including reasonable attorney's fees, even beyond the bond (CPLR 6212).

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How to collect a judgment in New York

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You collect a New York money judgment by finding the debtor's assets and using the CPLR article 52 tools to freeze and take them:

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1. Docket the judgment in each county where the debtor owns real estate. A Supreme Court judgment is docketed in the county where it is entered; elsewhere, file a transcript (CPLR 5018). The judgment is then a lien on the debtor's real estate there until ten years after the judgment-roll was filed (CPLR 5203).

2. Find assets with information subpoenas and, when needed, a subpoena for the debtor's deposition or documents (CPLR 5224).

3. Freeze bank accounts and money owed to the debtor with restraining notices (CPLR 5222).

4. Deliver a property execution (CPLR 5230) to an enforcement officer to levy on the debtor's property and on debts owed to the debtor. In New York City that is the New York City Sheriff or a city marshal, who cannot levy on real estate (New York City Civil Court Act § 1609). In Nassau and Suffolk, it is the county sheriff.

5. For an individual with wages, use an income execution: generally up to 10% of gross income, with protections for low earners (CPLR 5231).

6. Seek a turnover order against the debtor, or a special proceeding against a bank, customer or transferee holding the debtor's money or property (CPLR 5225; CPLR 5227).

7. Enforce compliance: ignoring a subpoena or restraining notice is punishable as contempt (CPLR 5251).

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Restraining notices and information subpoenas

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A restraining notice freezes a judgment debtor's money or property. An information subpoena makes the debtor, a bank or another third party answer written questions about the debtor's assets.

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The court clerk or the creditor's attorney issues a restraining notice without a hearing. It is served personally or by registered or certified mail (CPLR 5222).

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• Served on the debtor, it bars transfers of the debtor's property until the judgment is satisfied or vacated.

• Served on a bank or anyone that owes the debtor money or holds its property, it freezes that property for one year, or until the judgment is satisfied or vacated. A bank that holds back twice the amount due need not hold more.

• A second notice to the same person for the same judgment needs the court's permission, and no more than two a year may be served on an individual's bank account (CPLR 5222(c)).

• Individual debtors keep a protected amount ($3,425 for cases begun on or after April 1, 2024, adjusted every three years under CPLR 5205(l)) if exempt payments such as Social Security were deposited electronically in the prior 45 days, and in any case 240 times the minimum hourly wage. Exempt funds stay exempt, and the debtor must get a notice of exemptions (CPLR 5222(d), (h), (i)).

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How long is a judgment good for in New York?

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A New York money judgment is generally enforceable for 20 years. Twenty years after the creditor could first enforce it, the judgment is presumed paid. A payment or signed written acknowledgment by the debtor starts a new 20-year period (CPLR 211(b)).

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The real estate lien lasts ten years from the filing of the judgment-roll (CPLR 5203). Between the original parties, the creditor can sue for a renewal judgment, starting in the year before the ten years run out. The new lien begins when the old one ends (CPLR 5014). Lien disputes can also involve real estate litigation.

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Every money judgment bears interest from entry (CPLR 5003) at the same CPLR 5004 rates, unless another statute sets a different rate.

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Fraudulent transfers: when a debtor moves assets to avoid paying

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New York's fraudulent transfer law, now called the Uniform Voidable Transactions Act (Debtor and Creditor Law article 10), lets a creditor undo a transfer made to dodge creditors and pursue the person who received the asset. The older fraudulent conveyance rules still govern transfers made before April 4, 2020. A transfer is voidable in three main situations:

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• Actual intent to hinder, delay or defraud any creditor. Courts weigh "badges" such as a transfer to an insider, a concealed transfer, or a transfer after the debtor was sued or threatened with suit (Debtor and Creditor Law § 273).

• No reasonably equivalent value, when the debtor was left with unreasonably small assets for its business, or intended or reasonably should have expected to incur debts it could not pay as they came due (§ 273). For creditors whose claims already existed, it is enough that the debtor was or became insolvent (Debtor and Creditor Law § 274).

• Insider repayment: repaying an old debt owed to an insider while insolvent, when the insider had reasonable cause to believe the debtor was insolvent. This protects only creditors whose claims already existed (§ 274(b)).

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The creditor must prove the claim by a preponderance of the evidence (§ 273(c); § 274(c)). Remedies include setting the transfer aside as far as needed to pay the claim, attachment, an injunction and a receiver (Debtor and Creditor Law § 276).

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A recipient who took in good faith and for reasonably equivalent value has a defense to an actual-intent claim. Good-faith recipients are also protected to the extent of the value they gave (Debtor and Creditor Law § 277).

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The deadlines end the claim itself (Debtor and Creditor Law § 278). Actual-intent claims: four years after the transfer, or one year after it was or could reasonably have been discovered, if later. No reasonably equivalent value: four years. Insider repayments: one year.

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If the debtor also lied to get the loan or goods, see fraud and misrepresentation.

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Defending a debt collection lawsuit or stopping judgment collection

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If your company, or you as a guarantor, is sued over a business debt, respond on time. In New York State court that is generally 20 days after personal delivery in the state. For most other methods, such as service on a company through the Secretary of State, it is 30 days after service is complete (CPLR 320(a)). In federal court it is usually 21 days (Fed. R. Civ. P. 12(a)). Then consider:

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• Defending a CPLR 3213 motion: does the claim truly rest on the document and non-payment alone, and did the guaranty waive your defense?

• Settling: a written payment plan or stipulation can end the case; read its default terms first.

• Vacating a default judgment: for an excusable default, move within one year after service of the judgment with notice of entry, and show a reasonable excuse and a potentially meritorious defense. Other grounds include lack of jurisdiction, such as improper service, and fraud or misconduct by the other side (CPLR 5015(a)).

• No notice of the suit: a defendant not served by personal delivery, such as a company served through the Secretary of State, may be allowed to defend if it did not get notice in time and has a meritorious defense. It must act within one year after learning of the judgment and five years after entry (CPLR 317).

• Limiting enforcement: any interested person can ask the court to deny, limit, condition or modify an enforcement procedure (CPLR 5240); individuals can also claim the exemptions above.

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What a debt collection lawyer costs

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Yassi Law P.C. bills most commercial matters by the hour: $450 an hour, set out in a written engagement letter. A contingency or hybrid fee is possible only as an exception in special cases. Your first consultation is free.

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Guides on this topic

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• Voidable transfers under New York's UVTA: how a creditor can undo a debtor's transfer of assets to insiders, and how long it has to sue.

• How prejudgment attachment works in New York commercial cases: whether you can tie up a defendant's assets while your suit is pending, and what the bond costs.

• What is a default judgment in New York?: what a creditor can do when a debtor ignores the lawsuit, and the deadline to ask for a default judgment.

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Frequently asked questions

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How long is a judgment good for in New York?

A New York money judgment is generally enforceable for 20 years, and a payment or signed written acknowledgment by the debtor starts a new 20-year period (CPLR 211(b)).

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What is a restraining notice in New York?

A restraining notice is a notice from the court clerk or the creditor's attorney that freezes a judgment debtor's property (CPLR 5222). On a bank account it lasts one year or until the judgment is paid or vacated.

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What is an information subpoena, and how is it served?

An information subpoena is a set of written questions about a judgment debtor's assets, which the recipient must answer in writing under oath within seven days after receipt (CPLR 5224). It may be served by registered or certified mail, return receipt requested, with a prepaid return envelope. One sent to anyone other than the debtor must certify a reasonable belief that the recipient has helpful information, or it is void.

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What is the statute of limitations for a fraudulent transfer in New York?

For transfers made on or after April 4, 2020, a fraudulent (voidable) transfer claim in New York generally must be brought within four years of the transfer; insider-repayment claims have one year, and actual-intent claims can run to one year after discovery, if later (Debtor and Creditor Law § 278). Older transfers fall under the former fraudulent conveyance law.

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What kind of lawyer do I need for debt collection?

For a business debt or judgment, you need a commercial litigation lawyer who handles New York collection suits and judgment enforcement. Ask how the lawyer would find assets, and what the first steps and fees would be.

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How much do debt collection lawyers charge?

Fees vary by lawyer and matter, so get the terms in writing. Yassi Law P.C. bills most commercial matters at $450 an hour, and the first consultation is free.

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If a customer, borrower or guarantor owes your business money, or a creditor is pursuing your business or you as a guarantor, contact the office or call (646) 992-2138 for a free consultation with Reza Yassi.