House of Representatives
File No. 866
January Session, 2001
(Reprint of File No. 522)
As Amended by House Amendment
Approved by the Legislative Commissioner
June 2, 2001
Be it enacted by the Senate and House of Representatives in General Assembly convened:
Section 1. Section 52-367b of the general statutes is repealed and the following is substituted in lieu thereof:
(a) Execution may be granted pursuant to this section against any debts due from any banking institution to a judgment debtor who is a natural person, except to the extent such debts are protected from execution by sections 52-352a, 52-352b, 52-352c, of the general statutes revised to 1983, 52-354 of the general statutes revised to 1983, 52-361 of the general statutes revised to 1983 and section 52-361a, as well as any other laws or regulations of this state or of the United States which exempt such debts from execution.
(b) If execution is desired against any such debt, the plaintiff requesting the execution shall notify the clerk of the court. In a IV-D case, the request for execution shall be accompanied by an affidavit signed by the levying officer attesting to an overdue support amount of five hundred dollars or more which accrued after the entry of an initial family support judgment. If the papers are in order, the clerk shall issue such execution containing a direction that the officer serving the same shall, within seven days from the receipt by the officer of such execution, make demand (1) upon the main office of any banking institution having its main office within the county of such officer, or (2) if such main office is not within such officer's county and such banking institution has one or more branch offices within such county, upon an employee of such a branch office, such employee and branch office having been designated by the banking institution in accordance with regulations adopted by the Commissioner of Banking in accordance with chapter 54, for payment of any such nonexempt debt due to the judgment debtor and, after having made such demand, shall serve a true and attested copy of the execution, together with the affidavit and exemption claim form prescribed by subsection (k) of this section, with [his] such officer's doings endorsed thereon, with the banking institution officer upon whom such demand is made.
(c) If any such banking institution upon which such execution is served and upon which such demand is made is indebted to the judgment debtor, it shall remove from the debtor's account the amount of such indebtedness not exceeding the amount due on such execution before its midnight deadline, as defined by section 42a-4-104. Notwithstanding the provisions of this subsection, if electronic direct deposits that are readily identifiable as exempt federal veterans' benefits, Social Security benefits, including, but not limited to, retirement, survivors' and disability benefits or supplemental security income benefits were made to the judgment debtor's account during the thirty-day period preceding the date that the execution was served on the banking institution, then a banking institution shall leave the lesser of the account balance or eight hundred dollars in the judgment debtor's account; provided nothing in this subsection shall be construed to limit a bank's right or obligation to remove such funds from the debtor's account if required by any other provision of law or by a court order. The judgment debtor shall have access to such funds left in the judgment debtor's account pursuant to this subsection. The banking institution may notify the judgment creditor that funds have been left in the judgment debtor's account pursuant to this subsection. Nothing in this subsection shall alter the exempt status of funds which are exempt from execution under subsection (a) of this section or under any other provision of state or federal law, or the right of a judgment debtor to claim such exemption. Nothing in this subsection shall be construed to affect any other rights or obligations of the banking institution with regard to the funds in the judgment debtor's account.
(d) [Upon] If any funds are removed from the debtor's account pursuant to subsection (c) of this section, upon receipt of the execution and exemption claim form from the serving officer, the banking institution shall forthwith mail copies thereof, postage prepaid, to the judgment debtor at [his] the judgment debtor's last known address with respect to the affected accounts on the records of the banking institution. The institution shall hold the amount removed from the debtor's account pursuant to subsection (c) of this section for fifteen days from the date of the mailing to the judgment debtor and during such period shall not pay the serving officer.
(e) To prevent the banking institution from paying the serving officer, as provided in subsection (h) of this section, the judgment debtor shall give notice of a claim of exemption by delivering to the banking institution, by mail or other means, the exemption claim form or other written notice that an exemption is being claimed. The banking institution may designate an address to which the notice of a claim of exemption shall be delivered. Upon receipt of such notice, the banking institution shall, within two business days, send a copy of such notice to the clerk of the court which issued the execution.
(f) (1) Upon receipt of an exemption claim form, the clerk of the court shall enter the appearance of the judgment debtor with the address set forth in the exemption claim form. The clerk shall forthwith send file-stamped copies of the form to the judgment creditor and judgment debtor with a notice stating that the disputed assets are being held for forty-five days from the date the exemption claim form was received by the banking institution or until a court order is entered regarding the disposition of the funds, whichever occurs earlier, and the clerk shall automatically schedule the matter for a short calendar hearing. The claim of exemption filed by such debtor shall be prima facie evidence at such hearing of the existence of the exemption.
(2) Upon receipt of notice from the banking institution pursuant to subsection (c) of this section, a judgment creditor may, on an ex parte basis, present to a judge of the Superior Court an affidavit sworn under oath by a competent party demonstrating a reasonable belief that such debtor's account contains funds which are not exempt from execution and the amount of such nonexempt funds. Such affidavit shall not be conclusory but is required to show the factual basis upon which the reasonable belief is based. If such judge finds that the creditor has demonstrated a reasonable belief that such debtor's account contains funds which are not exempt from execution, such judge shall authorize the judgment creditor to submit a written application to the clerk of the court for a hearing on the exempt status of funds left in the judgment debtor's account pursuant to subsection (c) of this section. The judgment creditor shall promptly send a copy of the application and the supporting affidavit to the judgment debtor. Upon receipt of such application, the clerk of the court shall automatically schedule the matter for a short calendar hearing and shall give written notice to both the judgment creditor and the judgment debtor. The notice to the judgment creditor pursuant to subsection (c) of this section shall be prima facie evidence at such hearing that the funds in the account are exempt funds. The burden of proof shall be upon the judgment creditor to establish the amount of funds which are not exempt.
(g) If an exemption claim is made pursuant to subsection (e) of this section, the banking institution shall continue to hold the amount removed from the judgment debtor's account for forty-five days or until a court order is received regarding disposition of the funds, whichever occurs earlier. If no order is received within forty-five days of the date the banking institution sends a copy of the exemption claim form or notice of exemption to the clerk of the court, the banking institution shall return the funds to the judgment debtor's account.
(h) If no claim of exemption is received by the banking institution within fifteen days of the mailing to the judgment debtor of the execution and exemption claim form pursuant to subsection (d) of this section, the banking institution shall, upon demand, forthwith pay the serving officer the amount removed from the judgment debtor's account, and the serving officer shall thereupon pay such sum, less [his] such officer's fees, to the judgment creditor, except to the extent otherwise ordered by a court.
(i) The court, after a hearing conducted pursuant to subsection (f) of this section, shall enter an order determining the issues raised by the claim of exemption. The clerk of the court shall forthwith send a copy of such order to the banking institution. Such order shall be deemed to be a final judgment for the purposes of appeal. No appeal shall be taken except within seven days of the rendering of the order. The order of the court may be implemented during such seven-day period, unless stayed by the court.
(j) If both exempt and nonexempt moneys have been deposited into an account, for the purposes of determining which moneys are exempt under this section, the moneys most recently deposited as of the time the execution is levied shall be deemed to be the moneys remaining in the account.
(k) The exemption claim form, execution and clerk's notice regarding the filing of a claim of exemption shall be in such form as prescribed by the judges of the Superior Court or their designee. The exemption claim form shall be dated and include a checklist and description of the most common exemptions, instructions on the manner of claiming the exemptions, and a space for the judgment debtor to certify those exemptions claimed under penalty of false statement.
(l) If records or testimony are subpoenaed from a banking institution in connection with a hearing conducted pursuant to subsection (f) of this section, the reasonable costs and expenses of the banking institution in complying therewith shall be recoverable by it from the party requiring such records or testimony, provided, the banking institution shall be under no obligation to attempt to obtain records or documentation relating to the account executed against which are held by any other banking institution. The records of a banking institution as to the dates and amounts of deposits into an account in such institution shall, if certified as true and accurate by an officer of the banking institution, be admissible as evidence without the presence of the officer in any hearing conducted pursuant to subsection (f) of this section to determine the legitimacy of a claim of exemption made under this section.
(m) If there are moneys to be removed from the debtor's account, prior to the removal of such moneys pursuant to subsection (c) of this section the banking institution shall receive from the serving officer as representative of the judgment creditor a fee of eight dollars for its costs in complying with the provisions of this section which fee may be recoverable by the creditor as a taxable cost of the action.
(n) If the banking institution fails or refuses to pay over to the serving officer the amount of such debt, not exceeding the amount due on such execution, such banking institution shall be liable in an action therefor to the judgment creditor named in such execution for the amount of nonexempt moneys which it failed or refused to pay over, [and the] excluding funds of up to eight hundred dollars which the banking institution in good faith allowed the judgment debtor to access pursuant to subsection (c) of this section. The amount so recovered by such judgment creditor shall be applied toward the payment of the amount due on such execution. Thereupon the rights of the banking institution shall be subrogated to the rights of the judgment creditor. If such banking institution pays exempt moneys from the account of the judgment debtor over to the serving officer contrary to the provisions of this section, such banking institution shall be liable in an action therefor to the judgment debtor for any exempt moneys so paid and such banking institution shall refund or waive any charges or fees by the bank, including, but not limited to, dishonored check fees, overdraft fees or minimum balance service charges and legal process fees, which were assessed as a result of such payment of exempt moneys. Thereupon the rights of the banking institution shall be subrogated to the rights of the judgment debtor.
(o) Except as provided in subsection (n) of this section, no banking institution or any officer, director or employee thereof shall be liable to any person with respect to anything done or omitted in good faith or through the commission of a bona fide error that occurred despite reasonable procedures maintained by the banking institution to prevent such errors in complying with the provisions of this section.
(p) Nothing in this section shall in any way restrict the rights and remedies otherwise available to a judgment debtor at law or in equity.
(q) Nothing in this section shall in any way affect any rights of the banking institution with respect to uncollected funds credited to the account of the judgment debtor, which rights shall be superior to those of the judgment creditor.
(r) For purposes of this subsection, "exempt" shall have the same meaning as in subsection (c) of section 52-352a. Funds deposited in an account that has been established for the express purpose of receiving electronic direct deposits of public assistance payments from the Department of Social Services shall be exempt.
Sec. 2. This act shall take effect January 1, 2002.
The following fiscal impact statement and bill analysis are prepared for the benefit of members of the General Assembly, solely for the purpose of information, summarization, and explanation, and do not represent the intent of the General Assembly or either House thereof for any purpose:
OFA Fiscal Note
Potential Minimal Revenue Loss
The bill could result in a minimal revenue loss to state collections by requiring banks served with court-ordered judgments against debtors to leave $800 in the debtor's account(s) if a recent transfer of funds into said account(s) has occurred from certain readily identifiable benefits. Most or all of the $800 would presumably be exempt under current practice. Consequently, there would be little or no impact on state collections.
House “A” reduced from $1,000 to $800 the minimal amount of money that must be left in a judgment debtor’s account(s) and decreased the potential minimal revenue loss.
OLR Amended Bill Analysis
By law, a creditor may obtain a court-ordered judgment against someone who owes him money (debtor). The creditor may execute or serve an order on any banking institution (banks, savings and loan institutions, and credit unions, hereafter “banks”) where the debtor has an account. Unless the debtor claims that money in the account is exempt from execution, the bank must release funds, up to the amount of the judgment, to the creditor.
This bill requires banks served with these orders to (1) leave $800 in the debtor’s account (or the entire account balance, if it contains less than $800) if it recently received by electronic direct deposit “readily identifiable” exempt federal veterans’ or Social Security benefits and (2) give the debtor access to the money. Banks can depart from this requirement if directed by any other law or by court order, and creditors can obtain court hearings if they reasonably believe that nonexempt funds have been withheld.
The bill specifies that the requirement that banks leave this money in these accounts does not alter (1) the exempt status of funds that federal or state laws exempt from execution, (2) the account holder’s right to claim exemptions, or (3) the bank’s other rights or obligations with respect to the funds in these accounts. It permits a bank to notify the creditor that it has left funds in the debtor’s account as a result of the bill’s requirements and makes this notice prima facie evidence at court hearings that the funds are exempt.
*House Amendment “A” (1) reduces to $800 the protected amount, (2) modifies the exempt funds covered, (3) changes the effective date from October 1, 2001 to January 1, 2002, (4) adds notice and hearing provisions, and (5) immunizes bank errors.
EFFECTIVE DATE: January 1, 2002
BANK LIABILITY TO CREDITORS AND ACCOUNT HOLDERS
When a creditor serves an order on the debtor’s bank, the bill requires the bank to ignore $800 in the debtor’s account (or the entire account balance, if it is less than $800) if a readily identifiable exempt federal benefit was directly deposited electronically within the past 30 days. It makes banks that in good faith exclude this money, or do so by mistake, exempt from liability to creditors for doing so. Currently, banks that fail or refuse to release nonexempt funds to creditors become liable to them for the amount withheld.
The bill requires a bank to refund or waive all of its charges or fees, including dishonored check fees, overdraft fees or minimum balance service charges, and legal process fees for account holders from whose accounts it paid exempt money to a creditor. Current law limits a bank’s liability to account holders to the amount paid out improperly.
It also appears to expand banks’ immunity in execution matters by immunizing them from liability for bona fide errors that occur despite their having reasonable procedures to prevent them. Currently, only their good faith actions or omissions are immunized.
EX PARTE COURT PROCEDURES AND COURT HEARINGS
Under the bill, creditors can ask courts, on an ex parte basis, to schedule hearings when they reasonably believe that any of the funds a bank withheld pursuant to the bill are not exempt. A creditor must present a sworn affidavit to a Superior Court judge specifically describing the factual basis for its belief. If the judge finds that the creditor’s belief is reasonable, he must authorize the creditor to submit a written application for a hearing. The court clerk must schedule the hearing and give written notice to both the creditor and debtor. The creditor must also promptly send the debtor a copy of its application and supporting affidavit.
At the hearing, the creditor must prove, by a preponderance of evidence, the amount of funds in an account that are not exempt.
Bank and Creditor Obligations
By law, creditors cannot attach or seize exempt funds to satisfy a court judgment. But they may apply to a court clerk for an order directing a bank to pay over funds in a debtor’s account.
Banks served with such orders must remove funds from the account up to the amount of the judgment and mail the account holder notice and a form he must return to the bank if he claims that any of the removed funds are exempt.
When the debtor claims an exemption, the bank must notify the Superior Court and continue to hold the funds for the earlier of 45 days or until a court issues a disposition order for the disputed funds. If the debtor does not return the claim form to the bank within 15 days of the date of mailing, the bank pays over the funds to the creditor on request.
On May 4, the House referred the bill to the Banks Committee, which reported it favorably without changes on May 9.
Joint Favorable Substitute
Joint Favorable Report