When You Owe Money
Section 5 - Creditor's Methods to Collect Court Judgments
A Publication of Prairie State Legal Services
Page Revised: January 23, 2006
Content Updated: January 2006
About These Materials
The following information is not meant to be legal advice or to replace the advice you should receive from an attorney. There are times when it would be wise to consult a lawyer and other times when it is essential to do so. Always remember, each individual case is unique. This information applies to general consumer situations and should help you to avoid many problems before they happen. If you have additional questions or want legal advice, follow this link to find the Prairie State office nearest you.
Creditors' Methods to Collect Court Judgments
A judgment in favor of a creditor is an order saying the consumer owes a specified amount of money to the creditor. The creditor will not be happy with just getting a judgment unless the consumer pays the debt. If the consumer does not pay the debt, the creditor can use a number of special legal tools to force the consumer to pay. These legal tools are discussed below. The main thing to keep in mind about all of them is that they cannot be used unless the creditor first obtains a judgment. Another thing to think about is that you can prevent the creditor from taking any of these steps if you file for bankruptcy.
Citation to Discover Assets [on the Debtor]
After obtaining a judgment, the creditor can ask the court to direct the consumer to appear back in court for an additional [supplementary] proceeding. The purpose of this new hearing is to let the creditor ask questions of the debtor about his or her income and assets. In this way, the creditor can find out about your employer, your salary and your wages. The creditor can also find out where your bank accounts are located and what other income or property you have or will be getting.
With this information, the creditor can start proceedings to garnish your wages or bank account [information follows about Wage Deductions and Non-Wage Garnishment]. Or, the creditor can ask the judge to enter a turn-over order, which tells the consumer to turn over to the creditor some of his or her income or property. Remember though, that some income and property is exempt. If non-exempt assets other than cash or real estate are discovered, they can be ordered turned over to the Sheriff to conduct a public sale, the proceeds going to the creditor to pay off the judgment.
In Illinois, the document which directs the consumer to come back to court to answer the creditor's questions is called a Citation To Discover Assets. There are rules about how the Citation is given to you. Also, it must include a special notice. Among other things, this notice must advise you about your exemption rights and how to assert them. This notice to you must be in a particular form. By law, no turn-over order can be entered unless there is proof in the court record that the consumer properly received the Citation and a copy of the special notice about exemption rights. The Citation might direct the consumer to bring certain documents to court.
There are four important things to remember about a Citation to Discover Assets:
- This is a court-ordered appearance. Failure to show-up and answer the questions can result in arrest, a finding of contempt of court against the consumer, and a jail sentence. A Citation to Discover Assets should never be ignored! If you are jailed for failure to appear, you may be ordered to pay a large bond in order to be released. This money may then be applied to your debt, even if the bond money came from exempt income or property.
- The consumer is under oath when answering questions. You have to be truthful when answering questions about your income and assets. Lying under oath is perjury.
- Turn-over orders should not affect exempt income or property. Any court order entered at the supplementary proceeding should turn-over only those assets or income which are not protected by law. You should know your exemption rights and should tell the judge what property of yours is exempt, to make sure that exempt income or property is not included in any turn-over order. [See Exemptions Which Prevent Creditors From Taking Your Money or Property.] At any citation hearing you can ask the judge to declare whether certain income or assets are exempt.
- Be careful about agreeing to a court-ordered payment plan. The creditor or his attorney may try to get the consumer to agree to a payment or installment plan, and may try to have that agreement formalized by court order. A consumer should be very careful about making such an agreement, and should not do so unless absolutely certain that he or she can keep up with the payments. If you fail to make good on a court-ordered payment plan which you agreed to, you may possibly be held in contempt of court and jailed.
Citation to Discover Assets [on Third Parties]
Citations to Discover Assets can also be served on other persons or institutions who may be holding some of your assets. For example, this might be a bank where you have an account or an insurance company which owes you on a claim. Any third party served with a Citation also must come in for an examination and be subject to a turn-over order.
If the creditor serves a Citation on any third party, you [the consumer] must be given a special notice that tells you when to come to court for this proceeding, tells you your exemption rights, and tells you how to assert your exemption rights at the hearing. [See Exemptions Which Prevent Creditors from Taking Your Money or Property.] No turn-over order can be entered directing a third party to turn over your assets unless there is proof in the court record that you were properly served with the Citation and with a copy of the special notice about your exemption rights.
When a third party receives the Citation, it must freeze all assets which are not exempt under the law. The third party should not send any money to the creditor until it receives a court order or turn-over order to do so.
You should go to court to assert your exemption rights whenever a third party has frozen exempt assets or there is a possibility that exempt assets might get turned over at a citation hearing.
Wage Deductions
If you fail to pay a judgment, a creditor can use a wage deduction proceeding to try to get your employer to deduct a certain percentage of your wages from your paycheck and to have that amount sent to the creditor. Wage deduction is sometimes referred to as a wage garnishment.
The Wage Deduction Procedure: A wage deduction procedure cannot start before the creditor gets a court judgment. Then a creditor can file a document with the Clerk of the Circuit Court called a Wage Deduction Affidavit. This is a signed statement in which the creditor states his or her belief that your employer owes you wages. In that affidavit, the creditor must certify that, before filing the affidavit, he mailed a wage deduction notice [explained below] to you at your last known address. That address must also be stated in the affidavit.
At the same time the affidavit is filed, the creditor also sends a set of written questions [called interrogatories] to your employer and files them with the court. These questions help the creditor determine how much wages the employer owes you over a period of time, and to figure out how much of your non-exempt wages can be deducted. The employer must answer these interrogatories, file them with the court, and mail or deliver a copy of its answers to the creditor and to you.
When the court clerk receives the affidavit and interrogatories from the creditor, the clerk issues a summons to the employer. The summons gives the employer an amount of time to file its answer to the interrogatories and tells him or her the date the matter will be heard in court.
The employer is required to pay the consumer the amount of his or her exempt wages. However, the employer must hold, subject to orders from the court, the amount of non-exempt wages due or which may later come due during the period of the wage deduction [12 weeks]. [See following topic How Much Money Can Be Taken From Your Wages.] The employer cannot withhold more than the amount due on the judgment.
On the court date [stated on the summons], which takes place after the 12 week period, the court will decide whether the employer should turn the money being held over to the creditor. The law says this should not be done unless the Wage Deduction Affidavit certifies that a copy of the Wage Deduction Notice [see next topic] has been mailed to the consumer and the employer's answer to the interrogatories provides a summary of the computation used to determine the amount of non-exempt wages.
The Wage Deduction Notice: The notice which is mailed to you must be in a particular form. Among other things, the notice must identify the court case and inform you that the creditor has started a proceeding in court to force your employer to deduct your wages. The notice will tell you the date and time the matter is to be heard in court. The notice must also tell you that the amount of wages that may be deducted is limited by federal and Illinois law. It explains the mathematical formula for determining the amount of wages that lawfully can be deducted and the amount of your wages that are protected [exempt]. The notice tells you that you have the right to request a hearing to dispute the wage deduction because your wages are exempt, and tells you how to obtain that hearing.
How Much Money Can Be Taken From Your Wages? When the employer receives the summons, only part of your wages can be deducted and withheld from you. The employer cannot deduct from any of your weekly take-home pay [after taxes and Social Security are deducted] any amount that is up to 45 times the state minimum wage. As of January 1, 2006, the state minimum wage is $6.50 per hour. This means that, until the minimum wage is raised again, you are always entitled to take home at least $292.50 of your wages per week. If your take-home pay is this amount or less, no wages may be deducted at all. If your take-home pay is more than this amount, the employer can deduct the smaller of the following two amounts: [1] 15% of your weekly gross wages, or [2] the amount of your take-home pay over and above $292.50. In addition, the employer may withhold an additional small amount as a fee for their services in responding to the wage deduction process.
What You Should Do If Your Employer Is Deducting Wages: Determine how much money your employer is deducting from your paycheck. Figure out if they are taking more than they are allowed to take. If so, inform your employer and insist they take out only the lawful amount. When you get a copy of the employer's answers to the interrogatories, look to see how much non-exempt wages the employer says it has withheld. If the employer continues to withhold too much from your check, follow the instructions on the Wage Deduction Notice that tells you how to request a hearing to ask the court to declare the proper amount of your wages exempt.
Your Employer Cannot Fire or Suspend You: No employer may discharge or suspend any employee because his or her earnings have been the subject of a wage deduction proceeding. This protection for the consumer is only for a single debt. If an employer has to deal with a wage deduction from a second creditor on a different debt, then this protection is no longer available.
Non-Wage Garnishment
Not only can a creditor garnish [take] wages, but also can garnish money owed to or belonging to the consumer that is in the hands of others. Most often, a non-wage type of garnishment takes money from a consumer's bank account, although it can also be taken from an insurance company or anyone else who owes money to the consumer.
The Garnishment Procedure: The procedure for a non-wage garnishment is very similar to the wage deduction process. It cannot start before the creditor obtains a court judgment. Afterwards, the creditor files an affidavit with the Clerk of the Circuit Court in which the creditor states his belief that your bank [or some other person] has your property in their control or otherwise owes money to you. The bank or other person is known as the garnishee. The creditor also files a copy of a Garnishment Notice which must be mailed to you, the consumer. The creditor must also file a set of written questions [called interrogatories] to be answered by the garnishee. The interrogatories help the creditor determine how much non-exempt money or property is being held by the garnishee. The bank or other garnishee must answer these interrogatories, file them with the court, and mail or deliver a copy of its answers to the creditor and to you.
When the court clerk receives the affidavit, the Garnishment Notice and the interrogatories from the creditor, the clerk issues a garnishment summons. The summons tells the garnishee [for example, the bank] the time it has to file its answer to the interrogatories and the date the matter will be heard in court. The garnishee is required to hold, subject to orders from the court, the amount of non-exempt money or property it is holding, up to the amount due on the judgment.
On the court date stated on the summons [which is between 21 and 30 days after the summons is issued], the judge will decide whether the garnishee should turn the money being held over to the creditor. The law says that no deduction order can be entered unless the court record shows that a copy of the garnishment summons and the Garnishment Notice were mailed to you by first class mail, within 2 business days of service of summons on the bank or other garnishee.
The Garnishment Notice: The notice which is mailed to you must be in a particular form. The notice must identify the court case and inform you that the creditor has started a proceeding in court to force your bank or other garnishee to turn over monies in your account to pay off the judgment. The notice will tell you the date and time the matter is to be heard in court. The notice must also tell you that the amount of money or property [other than wages] that may be garnished is limited by federal and Illinois law. It must explain what amount of money or property is protected from garnishment [called exemptions]. [See the part of this booklet on Exemptions Which Prevent Creditors From Taking Your Money or Property.] The notice also tells you that you have the right to request a hearing to dispute the garnishment or to ask the court to declare certain of your money or property exempt. Finally, the notice tells you how to obtain that hearing.
How Much Money Can Be Garnished From Your Bank Account? When the bank or other garnishee receives the summons, they are required to freeze any non-exempt funds in your account, up to the amount of the judgment. A freeze means that you cannot withdraw that money nor can it be used to pay any checks you write. Be careful that you do not bounce checks in this situation! The court can later order that frozen funds be turned over to the creditor. [You can prevent this from happening by withdrawing the funds before the bank is served with the summons.] In addition, many banks receiving a garnishment summons will charge the account holder a small fee for its services in processing the garnishment.
What You Should Do If Your Bank [or Other Garnishee] Has Frozen Your Account? Remember, the bank is permitted to freeze only non-exempt funds. However, the bank may not know what amount of your funds are exempt. If the bank does freeze your account [or part of it], then you should inform the bank and the creditor if any of the money it has frozen is exempt. For example, every consumer has a "wild card" exemption of $4,000 in any property of his choice. You can choose to have up to $4,000 in the frozen account declared exempt under this "wild card" exemption. In addition, most forms of government benefits, including Public Aid and Social Security, are exempt. If your account consists entirely of these exempt government funds, then the entire account is exempt. If the bank refuses to release exempt funds, you may have to go to court to exercise this exemption. The Garnishment Notice tells you how to obtain a hearing to get the court to declare the funds in your account exempt.
Judgment Liens and Enforcement of Judgments Against Real Estate
A judgment can become a lien on real estate that is owned by the person the judgment is against. A judgment lien is a claim, like a security interest, belonging to the judgment creditor and giving the creditor the right, under certain circumstances, to have the property sold in order to pay your debt. In order to get this lien, the creditor must file certain documents in the county recorder's office. Creditors with a judgment lien can force the sale of the property that the lien is on. Even without filing for the lien, however, a judgment creditor can still ask the judge to have the property sold by the Sheriff so the creditor can collect his or her judgment.
Luckily for the consumer, however, there is something called a homestead exemption which makes it very difficult to sell the home of the person who owes money. Also, if the real estate is sold, there are certain things the consumer can do to get the property back.
The Effect of the Lien: A judgment creditor with a lien may be able to force a sale of your property to pay off your debt. Even if the creditor cannot force a sale, because the real estate is exempt or for other reasons, state law permits the lien to remain in effect for 7 years from the time it is entered or revived [an old judgment can be extended or revived]. For that period of time, the lien will "cloud the title" of your real estate because, if you want to sell the real estate, the judgment will have to be paid first.
The Homestead Exemption: In Illinois, an individual who occupies the real estate as a residence is entitled to a homestead exemption. The home cannot be sold to satisfy the lien if the amount of your equity interest in the home is less than the exemption amount.
The exemption is $15,000 for a single person, and $30,000 for a married couple who both own the residence. This must be compared to the debtor's equity interest in the property. A debtor's equity interest in real estate is figured by subtracting amounts owed on a mortgage [or other lien on the house] from the present value of the property. If the equity interest is less than the exemption, there cannot be a forced sale of the house to satisfy the lien.
For example, if a home is worth $85,000, but the sum of $75,000 is owed on the mortgage, the debtor's equity interest is $10,000. If the debtor is married, and both spouses own and live in the residence, they have a $30,000 exemption. Since the debtor's equity interest in the real estate is less than the exemption, the home cannot be sold to pay their debt.
However, if the amount of the equity interest is greater than the exemption amount, then the home might possibly be sold. If there is a forced sale, before the creditor could realize any money from the proceeds, the mortgage holder would have to be paid and the debtor would receive the amount of the homestead exemption. This means the creditor actually has to pay $15,000 [or $30,000] in cash to a debtor who has avoided payment of the judgment. Many creditors don't like the idea of paying the person who owes them money, so they may not want to force a sale.
There are other reasons why a creditor might not want to try to force a sale. The laws on homestead make it difficult to sell the residence of the judgment debtor. The creditor will have additional costs he must incur such as advertising costs, a lien search, appraisal of the property, a title report, recording charges, publication expenses, and the Sheriff's commission for conducting the sale.
It does not make sense for the creditor to force a sale of your home if the fair market value of the real estate is not substantially greater than the creditor's costs. Those costs include all of the above costs, together with the payment of the homestead exemption and all prior mortgages and liens. In addition, the complications arising from the homestead exemption and redemption rights will make this type of sale not very appealing to potential bidders.
For these reasons, creditors don't usually force sales of real estate.
Notice and Sale: The law requires that many things be done in trying to be sure that the debtor knows that the sale of his or her house will occur. The Sheriff must publish notice of the sale once a week for 3 successive weeks in a newspaper in the county where the property is located. A notice is also posted in 3 public places within the county, usually within the Sheriff's office and the courthouse. The notice must reflect the date, place and time of sale and identify both the creditor and the debtor. After the sale and payment of all costs and expenses, the Sheriff will deliver a Certificate of Sale to the purchaser.
Redemption Rights: In most cases, even where the creditor
has forced a sale of the real estate, the debtor has the right to
redeem the property. Redeem means to buy back. This can be done
within 6 months from the date of sale by paying the purchaser the
amount of money for which the premises were sold, plus interest at 10%
annually from the time of the sale.
Copyright 2002 Prairie State Legal Services, Inc.
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