How Creditors Can Collect Court Judgments

How Creditors Can Collect Court Judgments

Last updated: July 2010

Introduction
How a Creditor Can Find Out about Your Income and Assets
            The Citation to Discover Assets
            A Word about Court-Ordered Payment Plans
            Citations to Discover Assets Held by Third Parties
Wage Deductions
            The Wage Deduction Procedure
            The Wage Deduction Notice
            Amount of Money That Can Be Taken from Your Wages
            What You Should Do If Your Employer is Deducting Wages
            Your Employer Cannot Fire or Suspend You
Non-Wage Garnishment
            The Garnishment Procedure
            The Garnishment Notice
            Amount of Money That Can Be Garnished from Your Bank Account
            What You Should Do If Your Bank (or Other Garnishee) Has Frozen Your Account

Introduction

If you owe a person or company money and do not pay, that person or company can take you to court to try to force you to pay. If the person or company wins in court, they get a judgment which says you have to pay. The person or company that you owe money (called a "creditor") can use the court system to collect the money that the judgment says you owe. The ways to collect a judgment include the following:

  • Proceeding to Discover Assets - The creditor may not know how much money or property (called "assets") you have. In order to find out more about your assets the creditor can ask the court for help. By filing the correct forms and requesting the court's permission, the creditor can make you come to court to tell the creditor about your assets. The creditor starts this process by sending you a form called a Citation to Discover Assets;
  • Wage Deduction Proceeding - The creditor can ask the court to have your employer keep part of your wages from each paycheck to pay off the debt;
  • Garnishment Proceeding - The creditor can ask the court to take money you have to pay off the debt. Usually this action brings your bank to court and commands the bank to give money from your bank account to the creditor to pay off the debt;
  • Judgment Lien or Other Enforcement Against Your Real Estate - The creditor can ask the court to take control of any real estate that you own. This is called placing a lien on your property. If a lien is placed on your property, you may be forced to sell it to pay off the debt. Even if you do not have to sell the property, your property will be controlled by the court. This would prevent you from selling the property on your own until the judgment is paid in full.

A person who owes a debt cannot be put in jail for failing to pay it except in unusual circumstances. No one goes to jail for owing a debt unless they disobey the court. If you fail to pay when you are able to pay, you may be held in contempt of court. Also, if you ignore a court order or Citation to Discover Assets, you may be held in contempt of court. The judge can put you in jail if you are held in contempt of court.

How a Creditor Can Find Out about Your Income and Assets

When a creditor wins a lawsuit, the creditor gets a judgment which says that you owe the creditor a certain amount of money. A judgment does not do a creditor any good if the creditor cannot actually get paid. If the judgment is not paid quickly, the creditor can use special legal tools to force you to pay. These legal methods are discussed below. The main thing to keep in mind about all of these tools is that they cannot be used unless the creditor first obtains a judgment. You also can stop the creditor from taking any of these steps if you file for bankruptcy.

After getting a judgment, the creditor can ask the court to make you come back to court for an additional proceeding (called a "supplementary proceeding"). On this court date, the court holds a hearing and lets the creditor ask questions about your income and assets. The creditor can find out information about your employer and how much money you make. The creditor can also find out where you have bank accounts. Finally, the creditor can find out about any other income or property that you have or will be getting.

Once a creditor gets information about your income and assets, the creditor can ask the court to take money from your paycheck or bank account. The creditor can also ask the judge to enter a "turn-over order." A turn-over order makes you give the creditor some of your income or property that is not exempt (see Exemptions Which Prevent Creditors From Taking Your Money or Property). If you have non-exempt assets other than cash or real estate, the court may order you to give them to the sheriff. The sheriff sells the items and the money from the sale goes to the creditor to pay off the judgment. 

The Citation to Discover Assets

The creditor needs to prepare and deliver to you a Citation to Discover Assets in order to make you come to court to tell the creditor about your income and assets. The citation must be properly served on you, and it must include a special notice. This notice must advise you about your exemption rights and tell you how you can assert your exemption rights at or before the citation hearing (see Exemptions Which Prevent Creditors From Taking Your Money or Property). 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 you were served properly with the citation and a copy of the special notice about exemption rights.

The citation might tell you to bring certain documents to court for the hearing. The judge may ask you questions or may tell the creditor’s lawyer to ask you the questions.

There are four important things to remember about this hearing:

  • 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 you 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 used to pay your debt, even if the bond money came from exempt income or property;
  • You are 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 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, so you can make sure that exempt income or property is not included in any turn-over order. When you ask the court to say that certain property is exempt, the court must decide if that income or property is or is not exempt (see Exemptions Which Prevent Creditors From Taking Your Money or Property);
  • Even though a judgment has been entered against you, you can ask the creditor's attorney for a settlement that is less than the full judgment. If you do this, you probably will have to pay the creditor all or most of the debt in one payment. You may be able to negotiate a payment schedule with the creditor. The creditor is free to accept or reject your proposal. The court cannot force the creditor to accept your offer.  

A Word about Court-Ordered Payment Plans

The creditor or the creditor's attorney may try to get you to agree to a payment or installment plan. They may try to formalize this agreement with a court order. The court encourages debtors and creditors to enter into plans to pay off the judgment over time. If you keep up with your payments, you may be able to prevent the court from taking any money from your paycheck or bank account. You should be very careful about making a payment plan agreement.  Only agree if you know you will be able to keep up with the payments. If you agree to payments but do not make them, the court could decide that you could have made the payments and then hold you in contempt of court and put you in jail.

Citations to Discover Assets Held by Third Parties

Citations to Discover Assets can also be served on people or companies who have some of your money (called "third parties"). For example, a citation might be sent to a bank where you have an account or to an insurance company which owes you money on a claim. Any third party served with a citation must also go to court.

If the creditor serves a citation on any third party, you need to get a special notice that tells you when to come to court for this proceeding. The notice also must tell you what your exemption rights are and how to assert them at the hearing (see Exemptions Which Prevent Creditors From Taking Your Money or Property).

By law, no turn-over order can be entered telling a third party to turn over your assets unless there is proof in the court record that you were properly served with the citation. There must also be proof that you received 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. This means that you cannot use those assets which have been frozen. 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 if a third party has frozen exempt assets or if exempt assets might get turned over at a citation hearing. Even if your assets are exempt, your bank may charge you a fee for the citation.

Wage Deductions

Creditors can also use a wage deduction proceeding if you fail to pay a judgment. It is sometimes called a "wage garnishment." In this proceeding, the creditor is trying to get your employer to take a certain percentage out of your paycheck to pay off your debt.

The Wage Deduction Procedure

A wage deduction procedure cannot start before the creditor gets a court judgment. Afterward, a creditor can file a document with the court clerk called a Wage Deduction Affidavit. An affidavit is a sworn statement. In this document, the creditor states their belief that your employer owes you wages. In the document, the creditor must certify that, before filing the affidavit, the creditor mailed a Wage Deduction Notice (explained below) to you at your last known address. That address must also be stated in the document.

When the affidavit is filed, the creditor also files a set of written questions (called "interrogatories") with the Clerk of the Circuit Court. The creditor also sends the interrogatories to your employer. These interrogatories help the creditor to figure out how much wages the employer owes you for each paycheck. They also help the creditor to figure out the proper amount of non-exempt wages that can be deducted. The employer is required to answer these interrogatories, file them with the Clerk of the Circuit Court, and to mail or deliver a copy of its answers to the creditor and to you.

When the Clerk of the Circuit Court receives the affidavit and interrogatories from the creditor, the clerk will issue a summons which will be served on the employer. The summons tells the employer how much time it has to file its answer to the interrogatories and tells the employer when the hearing will be heard in court. The employer is required to pay you all of your exempt wages. However, the employer must hold, subject to orders from the court, the amount of non-exempt wages while the wage deduction is in effect. Of course, the employer cannot withhold more than the amount due on the judgment.

On the court date, which is stated in the summons, the court will decide whether the employer should turn the money being held over to the creditor. A judge cannot enter a wage deduction order unless the answers to interrogatories show how the wage computations were made. Also, the Wage Deduction Affidavit must certify that the creditor mailed the Wage Deduction Notice to you. You have the right to appear on the return date and contest the garnishment. You must ask the clerk to call your case. 

The Wage Deduction Notice

The Wage Deduction Notice must be in a particular form which is set by Illinois law. 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 case will 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 must explain the mathematical formula used to figure out how much of your paycheck can lawfully be taken out to pay your debt and how much cannot be taken out (exempt portion). The notice will also tell you that you have the right to request a hearing to dispute the wage deduction because your wages are exempt (see Exemptions Which Prevent Creditors From Taking Your Money or Property). It will tell you how to obtain that hearing.

Amount of Money That Can Be Taken from Your Wages

Only a portion of your paycheck can be deducted and withheld from you. The employer is not allowed to take any wages if your weekly take-home pay (i.e. after taxes and Social Security are taken out) is less than 45 times the state minimum wage. Right now, the state minimum wage is $8.25 per hour. This means that you are always allowed to take home at least $371.25 of your wages per week. If you make less than this amount, no wages can be taken out of your paycheck. If you make more than this amount per week, the employer can take out whichever is less of the two amounts below:

  • 15% of your weekly gross wages
  • The amount of your take-home pay over $371.25

In addition, your employer may also keep a 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 they are taking out more than they are supposed to be taking out, tell them immediately. Demand that they only take out the correct 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. The instructions tell you how to ask for a hearing to have the court decide the right amount to come out of each paycheck.

Your Employer Cannot Fire or Suspend You

No employer may fire or suspend any employee because his or her earnings are being deducted. In fact, it is a crime to fire or suspend you for being garnished. This protection for the debtor 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

In addition to getting money from your paycheck (see Wage Deductions), a creditor can take non-exempt money that someone owes you or money that belongs to you which is in someone else's hands. When a creditor does this, the creditor garnishes your money. The term "garnish" means "to take." Usually a non-wage garnishment takes money from your bank account. A creditor can also garnish money from an insurance company or anyone else that owes you money.

The Garnishment Procedure

The procedure for a non-wage garnishment is very similar to the wage deduction process. It can only happen if the creditor has a judgment. A creditor starts a non-wage garnishment by filing an affidavit. In this document, the creditor states his/her belief that you have money in someone else's control (such as a bank) or that someone owes you money. The bank or other person is called the "garnishee." The creditor also files a copy of a Garnishment Notice. This notice must be mailed to you. Finally, the creditor must file with the Clerk of the Circuit Court a set of written questions (called "interrogatories") to be answered by the garnishee. The answers to these questions help the creditor to figure out how much money of yours they can garnish. The bank or other garnishee must answer the questions, file them with the court, and mail or deliver a copy of its answers to the creditor and to you.

The Clerk of the Circuit Court will issue a garnishment summons when the creditor files the affidavit, Garnishment Notice, and interrogatories. The summons tells the garnishee when it must file its answers to the questions and the date the matter will be heard in court. The garnishee must freeze the amount of non-exempt money or property it is holding, up to the amount due on the judgment, or follow any other directions from the court.

The court will decide whether the garnishee should turn money over to pay the creditor. A deduction order cannot be entered unless the creditor shows in court that a garnishment summons and Garnishment Notice were mailed to you not more than 2 days after the summons went to the bank or other garnishee. The creditor must send these notices to you so you know what is happening to your money or property and so you can work to protect your exempt money or property.

The Garnishment Notice

The notice sent to you must be in a particular form set by law. The notice must identify the court case and inform you that the creditor has started a proceeding in court to take your money. The notice will tell you when the garnishee must return the interrogatories and when the matter will be heard in court (called the "return date"). 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").  The notice also tells you that you have the right to request a hearing to fight the garnishment or to ask the court to declare certain of your money or property exempt (see Exemptions Which Prevent Creditors From Taking Your Money or Property). Finally, the notice tells you how to obtain that hearing. You have the right to appear on the return date and be heard in court. You must ask the Clerk to call your case.

Assets protected from garnishment include:

  • Social Security proceeds
  • Public Aid benefits
  • Up to $4,000 in personal property, including bank accounts
  • Equity in a vehicle (up to $2,400)
  • Life insurance proceeds
  • Worker’s compensation, disability and unemployment compensation benefits
  • Veterans benefits, alimony or child support
  • Tools of your trade
  • Crime victims awards
  • $15,000 of a personal injury award
  • Retirement plans

Amount of Money That Can Be Garnished from Your Bank Account

The bank or other garnishee is required to freeze any non-exempt assets in your account when they receive the summons. They can freeze any money up to the full amount of the judgment. A freeze means that you cannot withdraw that money or use it to write checks. You need to be careful not to 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 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 can only freeze 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 tell the bank and the creditor if any of money it has frozen is exempt. For example, every debtor has a "wildcard" exemption of $4,000 in any property of his or her choice. You can choose to have up to $4,000 in the frozen account declared exempt under this wildcard exemption. In addition, most forms of government benefits, including Public Aid and Social Security, are exempt. If all of the money in your account is from government funds, the entire account is exempt. If the bank refuses to release exempt funds, you may have to go to court to exercise this exemption. 

You can request a hearing to claim your exemptions. You can do this by going to court on the return date and asking the clerk to call your case. You can also go to the office of the Clerk of the Circuit Court and request a hearing date. The Clerk of the Circuit Court will give you forms to fill out and will assign a hearing date. You must send a copy of the filled-out forms to the judgment creditor or its attorney, and to the garnishee. You must return to court on the assigned date to prove your exemptions.

At the hearing, you should tell the judge what particular property you believe is exempt. You also need to tell the judge the reason why you believe the property is exempt. Bring documents to help you prove the exemptions. Examples of these documents include Social Security benefits letters and copies of bank statements which show that all of the money in the account came from an exempt source.

If you received a Citation to Discover Assets, you were required to tell the creditor about your income and assets. You should tell the creditor which items you listed are exempt. You also should tell the creditor how you are going to use your $4,000 wildcard exemption. Do not allow the creditor or the creditor's attorney to present a turn-over order to the judge before you have had an opportunity to review that order. Tell the judge if it appears that the order seems to turn-over property which you have identified as exempt.

See Exemptions Which Prevent Creditors From Taking Your Money or Property for more information about exemptions and how to prove them.
 

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