If a Judgment Debtor Is a Beneficiary of an Estate, You Can Have the Distribution Sent to You Instead

Photo of a person signing papers to represent debtor estate beneficiaryIf you have a judgment against a person who owes you a sizable debt and had little success enforcing the judgment through traditional means, alternative options might afford better results. When the usual steps, such as levying the debtor’s bank account and garnishing the debtor’s wages, result in little success recovering monies owed, the judgment may seem uncollectible. However, if the debtor is a beneficiary of a deceased New Yorker’s estate, you may be able to enforce the judgment through estate distribution. Judgment enforcement laws in New York allow creditors to direct an estate distribution to a judgment creditor instead of to an estate beneficiary judgment debtor.


How to Enforce a Judgment Through Estate Distribution

To enforce a judgment through estate distribution, you need to obtain the name and address of the estate’s fiduciary representative from their county’s surrogate’s court. The fiduciary is usually either an executor or an administrator of the estate. Their name and address are public records listed at the Surrogate’s Court where the estate has been filed.

Once obtained, the judgment creditor’s attorney serves an information subpoena with a restraining notice on the representative. The restraining notice states that if any funds from the estate are due to the judgment debtor, they must be held and set aside for the benefit of the judgment creditor until the judgment amount is satisfied. Once satisfied, funds may be distributed to the judgment debtor. When it becomes time for the fiduciary to distribute funds to the estate beneficiary judgment debtor, the fiduciary must place a hold on the distribution due the debtor up to the entire amount of the judgment plus interest. The fiduciary must then notify the judgment creditor by responding to the restraining notice and indicating the amount being held. The judgment creditor then subsequently sends either a marshal or a sheriff through a writ of execution to execute and pick up the funds being held by the estate fiduciary to satisfy the judgment.

This process only works against a New York estate because the judgment only has enforcement power within the state of New York. A New Jersey executor would not be bound by a New York restraining notice, for example, if the estate was in New Jersey. The restraining notice should be issued as soon as possible, once the surrogate’s court appoints an estate representative, to prevent the estate fiduciary from distributing funds to the judgment debtor prior to receiving the restraining notice. If the executor is not appointed, there is no fiduciary to serve with the restraining notice.

What If the Judgment Debtor Is the Executor of the State and Ignores the Restraining Notice?

Should the fiduciary of the estate fail to honor the restraining notice, the judgment creditor can file a petition for contempt in the court where the judgment is entered. This could result in a judgment against the estate for monetary penalties for all amounts that were due to be turned over but were not, plus interest and costs. The fiduciary would then risk liability to other beneficiaries of the estate if their estate shares are reduced due to the fiduciary’s failure. It is in the fiduciary’s interest to comply with the restraining notice.

If you have a debt collection matter you need assistance with, contact Frank, Frank, Goldstein and Nager for a consultation.