First of all, there is more than one legal sense in which the term a person's "estate" is used. You are using it in the archaic sense of all of the property owned by a living natural person, but this is not a contemporary use of the term. Normally, the term estate is referred to property that belongs to a dead person that is subject to probate, the property that belongs to a trust, or the property that was transferred to a bankruptcy trustee by operation of law upon the filing of a bankruptcy petition.
None of those modern senses of the word apply to this question. You are just asking about the extent to which a particular kind of debt (criminal restitution) can be collected from the person who owes that debt.
Your tag also implies that you are particularly interested in New York law. The probate laws of the State of New York are codified in a portion of its statutes known as the EPTL (Estate, Powers and Trusts law), but as noted above, that is not relevant in this case. The criminal law provisions related to restitution, and the general rules applying to debt collection (spread across several of New York's statutes such as the Real Property Actions and Proceedings Law (RPAPL), the New York Penal Law, and the Civil Procedure Laws and Rules (CPLR)) are the laws applicable to your subquestions.
1) Mr. X has spent all the money and is broke. He can't possibly pay
the $1 million. When he gets out of jail and (presumably) starts
working again, how much of his income can he keep, and how is "excess
income" assessed toward the $1 million debt?
This involves the liability of Mr. X and not "his estate". If he goes bankrupt this debt would not be discharged if the proper procedural steps are taken.
In general, restitution judgments can be enforced by the procedures set forth for collection of a civil judgment and also through the terms of any relevant probation or parole conditions (which would typically allow for incarceration for willful failure to comply with the conditions to the extent that Mr. X is able to do so with minimal due process protections).
Civil judgments can be enforced through garnishment of amounts owed to you (such as bank account balances and wages) subject to certain exemptions from creditors (only some of which apply to restitution judgments) and through writs of execution against property owned by you (the process is quite different for tangible personal property v. real property). The general rule is that wages are exempt from creditors up to an amount equal to 30 hours times minimum wage or 75% of the total whichever is greater. There is usually no exemption for income as an independent contractor, businessman or for bank accounts (unless fully traceable to certain exempt assets).
Certain kinds of property (there is a long list) are exempt from creditors as well (although certain kinds of assets are exempt as against some but not other creditors).
2) Mr. X has a house worth $1 million with a mortgage of $1 million (a
civil liability). I have been told that a criminal judgment takes
precedence over a civil liability. Is it true, as my friend asserts,
that the $1 million crime victims will get their money before the
mortgagee after the house is sold?
This is also a claim against Mr. X and not his estate. Your friend was incorrect. A mortgage is a property interest that takes priority over an unsecured debt like a restitution judgment even if that debt may have special priorities in some circumstances.
(This assumes that the mortgage is recorded before a "judgment lien" is recorded in the real property records of the county where the house is purchased or is recorded contemporaneously with the purchase of the house. If a judgment lien is recorded and then a mortgage is entered into and recorded later, the judgment lien would have priority.)
3) Mr. X has a house worth $2 million with a $1 million mortgage, and
$1 million of equity. Is there anything (e.g. taxes) that will stand
in the way of the house being sold, $1 million being paid to reimburse
the crime victims, and $1 million to the mortgagee? Put another way,
what is the order of reimbursment between victim, mortgagee, and other
claimants such as taxes?
To grossly oversimplify a complicated process with a variety of exceptions:
- The highest priority would be any outstanding liens for unpaid property taxes,
- Then sometimes all or part of a homeowner's association lien,
- then the first mortgage,
- then any other other liens junior to the mortgage that are not subject to a homestead exemption of CPLR Section 5206, because the homestead exemption was waived or to which it does not apply by law (e.g. mechanic's liens for work done on the property but not paid for and second mortgages),
- then the homestead exemption amount (paid to Mr. X) which in New York ranges from $75,000 to $150,000 depending upon the county in question which remains exempt for one year if kept segregated or reinvested in a new home (twice as much if the debtor is married),
- then judgment liens paid in order of recording which were recorded prior to the restitution judgment lien.
The property interest in the house associated with judgment liens or other mortgages recorded after the restitution judgment lien foreclosed upon that burden the property (i.e. junior liens) are erased in a foreclosure, subject to a right of redemption set forth in in RPAPL Section 1352:
Sec. 1352. JUDGMENT FORECLOSING RIGHT OF REDEMPTION.
Where real property has been sold pursuant to a judgment in an action
to foreclose a mortgage, and an action is thereafter brought to
foreclose or extinguish a right of redemption in such real property,
the judgment, instead of directing a sale of the property, shall fix
the right of any person having a right of redemption therein or the
right to foreclose a subordinate mortgage or other lien and shall
provide that a failure to redeem or commence an action for the
foreclosure of such mortgage or other lien within such time shall
preclude such person having a right of redemption or the holder of
such mortgage or other lien from redeeming such property or
foreclosing such mortgage or other lien, and thereafter such person
having a right of redemption or the holder of such mortgage or other
lien shall be excluded from claiming any title or interest in such
property and all title or interests of such person having a right of
redemption in, or the right to foreclose a subordinate mortgage or
other lien against such property shall thereby be extinguished and
terminated.
The claims would be paid out of the proceeds of a sheriff's sale net of the costs of sale. If there is money left over after all of these claimants are paid, it would go to the property owner, Mr. X. But, in your scenario with a $1 million mortgage and a $1 million restitution lien and a $2 million value, there would be no excess. If a properly bid sale price is not enough to pay the entire restitution judgment, the shortfall called a "deficiency" remains as a "deficiency judgment" that is still owed by Mr. X.
Strictly speaking, the higher priority liens don't get paid from the sales proceeds (except the owner's homestead exemption amount), instead the foreclosure sale buyer takes the property subject to those liens and those senior lienholders have a right to foreclosure in turn if they are paid off.
Also, procedurally, the value of the property net of higher priority liens and encumbrances is determined by the highest bid made at a sheriff's sale (with the foreclosing debtor allowed to use the amount of the lien as payment), not on the basis of an appraisal or prolonged sale via a realtor. Often there will be no bidder other than the creditor bringing the foreclosure.
APPENDIX:
Criminal restitution in New York State is primarily governed by N.Y. Penal Law Section 60.27 which reads as follows:
Restitution and reparation
- In addition to any of the dispositions authorized by this article, the court shall consider restitution or reparation to the victim of
the crime and may require restitution or reparation as part of the
sentence imposed upon a person convicted of an offense, and after
providing the district attorney with an opportunity to be heard in
accordance with the provisions of this subdivision, require the
defendant to make restitution of the fruits of his or her offense or
reparation for the actual out-of-pocket loss caused thereby and, in
the case of a violation of section 190.78, 190.79, 190.80, 190.82 or
190.83 of this chapter, any costs or losses incurred due to any adverse action taken against the victim. The district attorney shall
where appropriate, advise the court at or before the time of
sentencing that the victim seeks restitution or reparation, the extent
of injury or economic loss or damage of the victim, and the amount of
restitution or reparation sought by the victim in accordance with his
or her responsibilities under subdivision two of section 390.50 of the
criminal procedure law and article twenty-three of the executive law.
The court shall hear and consider the information presented by the
district attorney in this regard. In that event, or when the victim
impact statement reports that the victim seeks restitution or
reparation, the court shall require, unless the interests of justice
dictate otherwise, in addition to any of the dispositions authorized
by this article that the defendant make restitution of the fruits of
the offense and reparation for the actual out-of-pocket loss and, in
the case of a violation of section 190.78, 190.79, 190.80, 190.82 or
190.83 of this chapter, any costs or losses incurred due to any adverse action, caused thereby to the victim. In the event that
restitution or reparation are not ordered, the court shall clearly
state its reasons on the record. Adverse action as used in this
subdivision shall mean and include actual loss incurred by the victim,
including an amount equal to the value of the time reasonably spent by
the victim attempting to remediate the harm incurred by the victim
from the offense, and the consequential financial losses from such
action.
- Whenever the court requires restitution or reparation to be made, the court must make a finding as to the dollar amount of the fruits of
the offense and the actual out-of-pocket loss to the victim caused by
the offense. In making this finding, the court must consider any
victim impact statement provided to the court. If the record does not
contain sufficient evidence to support such finding or upon request by
the defendant, the court must conduct a hearing upon the issue in
accordance with the procedure set forth in section 400.30 of the
criminal procedure law.
- The provisions of sections 420.10, 420.20 and 420.30 of the criminal procedure law shall apply in the collection and remission of
restitution and reparation.
- For purposes of the imposition, determination and collection of restitution or reparation, the following definitions shall apply:
(a) the term "offense" shall include the offense for which a defendant
was convicted, as well as any other offense that is part of the same
criminal transaction or that is contained in any other accusatory
instrument disposed of by any plea of guilty by the defendant to an
offense. (b) the term "victim" shall include the victim of the
offense, the representative of a crime victim as defined in
subdivision six of section six hundred twenty-one of the executive
law, an individual whose identity was assumed or whose personal
identifying information was used in violation of section 190.78,
190.79 or 190.80 of this chapter, or any person who has suffered a financial loss as a direct result of the acts of a defendant in
violation of section 190.78, 190.79, 190.80, 190.82 or 190.83 of this
chapter, a good samaritan as defined in section six hundred twenty-one
of the executive law and the office of victim services or other
governmental agency that has received an application for or has
provided financial assistance or compensation to the victim. A victim
shall also mean any owner or lawful producer of a master recording, or
a trade association that represents such owner or lawful producer,
that has suffered injury as a result of an offense as defined in
article two hundred seventy-five of this chapter.
- (a) Except upon consent of the defendant or as provided in paragraph (b) of this subdivision, or as a condition of probation or
conditional discharge as provided in paragraph (g) of subdivision two
of section 65.10 of this chapter, the amount of restitution or
reparation required by the court shall not exceed fifteen thousand
dollars in the case of a conviction for a felony, or ten thousand
dollars in the case of a conviction for any offense other than a
felony. Notwithstanding the provisions of this subdivision, if an
officer of a school district is convicted of violating any section of
article one hundred fifty-five of this chapter where the victim of
such crime is such officer's school district, the court may require an
amount of restitution up to the full amount of the fruits of the
offense or reparation up to the full amount of the actual
out-of-pocket loss suffered by the victim, provided further that in
such case the provisions of paragraph (b) of this subdivision shall
not apply. (b) The court in its discretion may impose restitution or
reparation in excess of the amounts specified in paragraph (a) of this
subdivision, provided however that the amount in excess must be
limited to the return of the victim's property, including money, or
the equivalent value thereof; and reimbursement for medical expenses
actually incurred by the victim prior to sentencing as a result of the
offense committed by the defendant.
- Any payment made as restitution or reparation pursuant to this section shall not limit, preclude or impair any liability for damages
in any civil action or proceeding for an amount in excess of such
payment.
- In the event that the court requires restitution or reparation to be made to a person and that person dies prior to the completion of
said restitution or reparation, the remaining payments shall be made
to the estate of the deceased.
- The court shall in all cases where restitution or reparation is imposed direct as part of the disposition that the defendant pay a
designated surcharge of five percent of the entire amount of a
restitution or reparation payment to the official or organization
designated pursuant to subdivision eight of section 420.10 of the
criminal procedure law. The designated surcharge shall not exceed five
percent of the amount actually collected. Upon the filing of an
affidavit of the official or organization designated pursuant to
subdivision eight of section 420.10 of the criminal procedure law
demonstrating that the actual cost of the collection and
administration of restitution or reparation in a particular case
exceeds five percent of the entire amount of the payment or the amount
actually collected, as the case may be, the court shall direct that
the defendant pay an additional surcharge of not more than five
percent of the entire amount of a restitution or reparation payment to
such official or organization, or the actual cost of collection or
administration, whichever is less unless, upon application of the
defendant, the court determines that imposition of such additional
surcharge would cause undue hardship to the defendant, or any other
person who is financially supported by the defendant, or would
otherwise not be in the interest of justice. Such additional
surcharge, when added to the initial five percent surcharge, shall not
exceed ten percent of the amount actually collected.
- If the offense of which a person is convicted is a class A, class B, class C, or class D felony involving the sale of a controlled
substance, as defined in article two hundred twenty of this chapter,
and no other victim who is a person is seeking restitution in the
case, the term "victim" as used in this section, in addition to its
ordinary meaning, shall mean any law enforcement agency of the state
of New York or of any subdivision thereof which has expended funds in
the purchase of any controlled substance from such person or his agent
as part of the investigation leading to such conviction. Any
restitution which may be required to be made to a law enforcement
agency pursuant to this section shall be limited to the amount of
funds expended in the actual purchase of such controlled substance by
such law enforcement agency, less the amount of any funds which have
been or will be recovered from any other source, and shall not include
a designated surcharge pursuant to subdivision eight of this section.
Any law enforcement agency seeking restitution pursuant to this
section shall file with the court and the district attorney an
affidavit stating that funds expended in the actual purchase of a
controlled substance for which restitution is being sought have not
been and will not be recovered from any other source or in any other
civil or criminal proceeding. Any law enforcement agency receiving
restitution pursuant to this section shall promptly transmit to the
commissioner of the division of criminal justice services a report
stating the dollar amount of the restitution received.
- If the offense of which a person is convicted is defined in section 150.10, 150.15 or 150.20 of this chapter, and no other victim
who is a person is seeking restitution in the case, the term "victim"
as used in this section, in addition to its ordinary meaning, shall
mean any municipality or volunteer fire company which has expended
funds or will expend funds for the purpose of restoration,
rehabilitation or clean-up of the site of the arson. Any restitution
which may be required to be made to a municipality or volunteer fire
company pursuant to this section shall be limited to the amount of
funds reasonably expended or to be expended for the purpose of
restoration, rehabilitation or cleanup of the site of the arson, less
the amount of any funds which have been or will be recovered from any
other source, and shall not include a designated surcharge pursuant to
subdivision eight of this section. Any municipality or volunteer fire
company seeking restitution pursuant to this section shall file with
the court, district attorney and defense counsel an affidavit stating
that the funds reasonably expended or to be expended for which
restitution is being sought have not been and will not be recovered
from any other source or in any other civil or criminal proceeding.
For the purposes of this subdivision, "volunteer fire company" means a
fire company as defined in paragraph a of subdivision two of section
one hundred of the general municipal law.
- Notwithstanding any other provision of this section to the contrary, when a person is convicted of harming an animal trained to
aid a person with a disability in the second degree as defined in
section 195.11 of this chapter, or harming an animal trained to aid a
person with a disability in the first degree as defined in section
195.12 of this chapter, the court, in addition to any other sentence, shall order the payment of restitution to the person with a disability
who was aided by such animal.
- If the offense of which a person is convicted is defined in section 155.25, 155.30, 155.35, 155.40 or 155.42 of this chapter, and
the property taken is timber, the court may upon conviction, in
addition to any other sentence, direct the defendant to pay the
rightful owner of such timber an amount equal to treble the stumpage
value of the timber stolen as defined in section 71-0703 of the
environmental conservation law and for any permanent and substantial
damage caused to the land or the improvements thereon as a result of
such violation. Such reparations shall be of such kind, nature and
extent as will reasonably restore the lands affected by the violation
to their condition immediately before the violation and may be made by
physical restoration of such lands and/or by the assessment of
monetary payment to make such restoration.
- If the offense of which a person is convicted is defined in section 240.50, subdivision one or two of section 240.55, section
240.60, section 240.61, section 240.62 or section 240.63 of this chapter, and no other victim who is a person is seeking restitution in
the case, the term "victim" as used in this subdivision, in addition
to the ordinary meaning, shall mean any school, municipality, fire
district, fire company, fire corporation, ambulance association,
ambulance corporation, or other legal or public entity engaged in
providing emergency services which has expended funds for the purpose
of responding to a false report of an incident or false bomb as
defined in section 240.50, subdivision one or two of section 240.55,
section 240.60, section 240.61, section 240.62, or section 240.63 of
this chapter. Any restitution which may be required to be made to a
victim pursuant to this subdivision shall be limited to the amount of
funds reasonably expended for the purpose of responding to such false
report of incident or false bomb, less the amount of any funds which
have been or will be recovered from any other source and shall not
include a designated surcharge pursuant to subdivision eight of this
section. Any victim seeking restitution pursuant to this subdivision
shall file with the court, district attorney and defense counsel an
affidavit stating that the funds reasonably expended for which
restitution is being sought have not been and will not be recovered
from any other source or in any other civil or criminal proceeding,
except as provided for by section 3-112 of the general obligations
law.
- Where a transfer of probation has occurred pursuant to section 410.80 of the criminal procedure law and the probationer is subject to a restitution condition, the department of probation in the county in
which the order of restitution was imposed shall notify the
appropriate district attorney. Upon notification by the department of
probation, such district attorney shall file a certified copy of the
judgment with the clerk of the county in the receiving jurisdiction
for purposes of establishing a first lien and to permit institution of
civil proceedings pursuant to the provisions of subdivision six of
section 420.10 of the criminal procedure law.
