On December 31, 2021, Governor Hochul signed the Fair Consumer Judgment Interest Act into law. This amended the post-judgment interest rate on all judgments against consumers from 9% to 2%, effective April 30, 2022. As part of the law, any current income executions need to be amended with their respective marshal or sheriff, reflecting the new interest rate and the new calculation of remaining interest outstanding on the judgment. As such, creditors and their attorneys are in the process of issuing amended income executions to the sheriff or marshal reflecting the decreased rate of interest retroactive to the original date of the judgment.
An income execution (also known as a garnishment) is another manner of collecting a money judgment. When a money judgment is rendered in favor of one party and the judgment debtor fails to pay voluntarily, the judgment creditor may enforce his judgment with an income execution against a source of the debtor’s income.
How to Calculate Wages For Garnishment
It should be noted that only the wages of employees making above a certain threshold can be garnished. Typically, the general rule for calculating a permitted garnishment is to deduct 10% of the gross income for weekly disposable earnings over $450.
The $450 is directly tied to New York state’s minimum wage. Wages can be garnished if the weekly gross wages are more than 30 times New York’s minimum wage of $15.00 per hour, which is $450.00. If the minimum wage was increased to $20.00 per hour, the weekly gross wages would need to be more than $600.00 in order to be garnished.
A judgment in New York has a statute of limitations of 20 years. For some judgments entered as far back as 2010, this interest rate recalculation could mean that some judgments are now deemed paid off as the interest adjustment could reduce the judgment’s balance to zero if the principal was previously paid. Any creditor or attorney with current income executions should check with their respective marshal or sheriff to confirm the judgment balance when adjusted retroactively.
It should be noted that there is a federal case being litigated as to the application of the 2% retroactively. A number of financial institutions applied for and were granted a temporary restraining order in federal court, preventing New York sheriffs from applying the 2% retroactively from the date of the judgment. The financial institutions had no problem reducing the interest rate from the effective date of April 30, 2022. However, they argue that applying the 2% retroactively for interest previously collected at 9% is a constitutional “taking” without any compensation. The court’s decision on the case is still pending, however, the court did note that the financial institutions have a strong argument to be successful in their application, which is why the federal court granted the stay.
If you have a debt collection matter that you need assistance with, contact Frank, Frank, Goldstein and Nager. We have the experience that pays.
