A restraining notice is a post-judgment enforcement paper in New York either signed by the Court Clerk or by the creditor's lawyer. The short answer is that you can get a restraining notice lifted by either:
- paying off or vacating the underlying judgment,
- waiting a year, or
- seeking modification by a judge under CPLR 5240.
When merchant cash advance ("MCA") funders issue a restraining notice, it is almost always in connection with a confessed judgment or default judgment. The restraining notice will refer to the Court and Index Number of the case. For a triage plan the day your account is frozen, read: My Business Bank Account Was Frozen. What Do I Do?
What is a Restraining Notice in an MCA Case?
Under CPLR 5222, a New York creditor can issue a restraining notice through "the clerk of the court or the attorney for the judgment creditor as officer of the court." The creditor's attorney will serve it upon the bank personally or by registered or certified mail. It must set forth the judgment, the Court, amount due, and parties, and warn that disobedience is punishable as contempt of court.
Once served, the restraining notice prohibits the bank from transferring the debtor's property "then in and thereafter coming into" the bank's possession. Note, however, that a restraining notice does not take money from the debtor's bank account. That takes a levy by execution or a turnover order. See Can an MCA Company Garnish My Business Bank Account? In Pennsylvania, there is no such thing as a restraining notice; the creditor levies on the account pursuant to a writ of execution.
How Much Money Can Be Frozen by a Restraining Notice?
The restraining notice can only restrain up to twice the amount due on the judgment. The amount due should be the amount of the judgment that is still unpaid, so post-judgment payments or ACH withdrawals should reduce it. It is my understanding that the restraining notice can be for that amount at each bank. See Can an MCA Company Take Money from My Second Business Bank Account?
How Long Can a Restraining Notice Freeze My Bank Account?
The restraining notice is valid for one year from the date it was served upon the bank or until the judgment is satisfied or vacated. CPLR 5222(c) provides that a second restraining notice cannot be served upon the bank for the same judgment unless the Court grants permission. So a creditor's attorney cannot renew it after a year, or re-freeze an account released in negotiations, without Court permission.
Are Exemptions Available When My Business Bank Account Is Frozen?
Most exemptions from collection are available to individuals only. If the MCA company freezes an LLC's or corporation's bank account, the entity gets no exemption packet, claim period, or minimum balance. Currently, there is no "payroll" or "essential operations" exemption for an entity's bank account.
If the MCA company freezes a natural person's account, its attorney must include the exemption paperwork, or the notice is void as to that account. See CPLR 5222-a. There is 20 days from the postmark date to return a claim of exemption, and the bank releases the exempt funds 8 days after the claim's postmark unless the creditor objects. As of April 1, 2024, the Department of Financial Services set the CPLR 5205(l) exemption at $3,425, with the next change April 1, 2027. Individual exemptions apply to a sole proprietor, or to a guarantor with a judgment entered against him or her.
How do I get a restraining notice lifted?
Restraining notices may be lifted in a variety of ways, including:
| Method | Legal Basis | Requirements |
|---|
| Expiration | CPLR 5222(b) | One year from service on the bank must pass. |
| Payment or settlement of the judgment debt | CPLR 5222(b) | Written release to every bank, signed by the issuing attorney and naming the index number, plus a satisfaction or stipulation. |
| Vacating a default judgment | CPLR 5015(a) | Motion demonstrating excusable default, lack of jurisdiction, lack of proper service, or fraud. |
| Vacating a confessed judgment | Plenary Action | A plenary action demonstrating a CPLR 3218 filing county defect, usury, fraud, etc. |
| Motion to Modify the Restraining Notice | CPLR 5240 | Asking the Court to deny, limit, or condition the restraint (releasing funds in excess of the cap, carving out payroll, etc.) |
| Claim of Exemption | CPLR 5222-a | Claim of exemption forms (only for accounts of natural persons) |
| Adverse Claim | CPLR 5239 | A proceeding to demonstrate that the restrained funds belong to someone else |
| Filing Bankruptcy | 11 U.S.C. 362, 542 | Bankruptcy invokes the automatic stay, but funds held may need to be turned over by separate demand. |
If the restraining notice was issued defectively (restraining an entity not named in the judgment, restraining more than twice the amount due, restraining a mistaken amount, or serving a second restraining notice without leave of court), send a demand letter to the issuing attorney, then move under CPLR 5240 if it isn't resolved. The Court is not required to carve out payroll, so show it the judgment balance, the amount restrained, payroll owed, and trust fund taxes owed. An unsatisfied judgment held by a Yellowstone group funder may have to be vacated under the Attorney General's 2025 settlement. In bankruptcy, the Supreme Court ruled in City of Chicago v. Fulton (2021) that simple retention of estate property does not violate the automatic stay, and the stay will not protect a guarantor who has not filed.
Commonly Asked Questions about Restraining Notices
What's the difference between a restraining notice and a restraining order?
A restraining order is signed by a judge. A restraining notice under CPLR 5222 is issued by the Court Clerk or by the attorney for the creditor by virtue of being an officer of the court, and it can only be issued after a judgment.
Can the funder just send another restraining notice after a year?
If it's to the same bank for the same judgment, no, they need permission from a judge under CPLR 5222(c) to serve more than one restraining notice on the same person for the same judgment.
What happens if I move money out of my account after a restraining notice?
Willful disobedience of a restraining notice can result in contempt of court sanctions under CPLR 5251, for both debtors who move money after being served and banks that release funds after being served.
Was the bank allowed to charge me a fee for dealing with this restraining notice?
If the bank could not lawfully restrain your account, or if the way in which the bank restrained your account did not comply with the CPLR, then the bank shall not charge you a fee under CPLR 5222(j).