Effective July 25, 2012, Judgment Debtors In
 
Illinois Receive Additional Protections
 
Written by Josh R. Ladwig
As published in the Califf & Harper, P.C. September 2012 Newsletter
 
 
 
Effective July 25, 2012, judgment creditors in Illinois will be required to give additional notice and opportunity to debtors before receiving a body attachment order (735 ILCS 5/12-107.5). A body attachment order states that a debtor held in contempt for not making a payment pursuant to a judgment may be jailed and required to post a bond. The new law requires the debtor be served with a notice, called an "order to show cause," prior to a body attachment order being granted. In other words, the debtor is given an opportunity to appear in court and explain why the debtor should not be jailed for non-payment of a judgment or lien.
 
Debtors May Request a Hearing to Declare Assets and Income Non-Exempt
 
Prior to an "order to show cause," a debtor will be required to attend a "citation hearing." A "citation hearing" is used by a creditor to discover assets or income of a debtor, receive a deduction order or garnishment of a debtor's wages, or compel the debtor to apply non-exempt assets or income to a judgment or lien. According to the new law, prior to a "citation hearing" a debtor may request a separate hearing to declare assets or income exempt from a judgment or lien.
 
Upon notification to the clerk of courts, a debtor will receive a detailed "Income and Asset Form" which the debtor must complete prior to the hearing. The form requests information related to all types of possible assets and income the debtor may possess and requires proof of such assets or income including pay stubs, account statements, and other documents. While presumably tedious, this pre-"citation hearing" will allow a debtor to know what is and is not exempt from judgment. The additional hearing also acts as another stepping stone which may delay a creditor’s claim of assets or income. As a positive for creditors, a pre-"citation hearing" hearing such as this may create more transparency of a debtor’s assets and income, assisting a creditor which may otherwise be required to force a debtor to show assets and income. Due to this transparency it will be interesting to see how often debtors request these hearings.
 
Bond May Be Turned Back Over to Debtor Rather Than Creditor
 
If a debtor is held in contempt and jailed, the new law provides the debtor’s bond will be returned to the debtor unless all of the following are true:
 
1) The debtor willfully refused to comply with a payment order;
 
2) Bond money belongs to the debtor and not a third party; and
 
3) All or part of the funds are non-exempt from judgment, garnishment, or lien.
 
If these conditions are met, then the judgment creditor may request turnover of the bond to the creditor in part or complete satisfaction of a judgment, rather than a return of the bond to the debtor or a third party.
 
The requirements place burdens on both the creditor and the debtor. In order to receive the bond, the creditor must show the debtor willfully refused to comply with the payment order. On the other hand if the debtor is able to show the funds should be exempt from judgment, garnishment, or lien, then the bond will be returned to the debtor. A debtor’s possible exemptions are described in section 2-1402(b) and include some of the following items:
 
  • The debtor's equity value up to $4,000 in any personal property; Social Security and Supplemental Security Income (SSI) benefits; public assistance; unemployment compensation and workers’ compensation benefits; veteran’s benefits; equity value up to $2,400 in one motor vehicle; and equity value up to $1,500 in any professional books or tools of the trade of the debtor;
  • A homestead exemption up to $15,000 for one property which is owned and occupied as a residence;
  • Calculations which allow the exemption of a percentage of weekly wages earned by the debtor; and
  • Pension and retirement benefits and refunds which may be exempt under Illinois law.
 
Tools of the Trade
 
The new laws create a couple potential additional steps between a judgment against a debtor and collection by a creditor. Debtors have been given a possible delay tactic by which the debtor may request a hearing to declare income and assets exempt, however, this may also increase transparency of the debtor's available non-exempt assets and income. The debtor may also attempt to prevent a creditor from claiming a debtor's bond if the debtor is jailed. Neither of the new laws truly creates a shift towards a debtor, however, as non-exempt assets and income will still eventually be applied to a judgment or lien. Additionally, perhaps creditors will enjoy the transparency granted by a hearing to declare assets or income non-exempt, but only time will tell whether this tool is actually used by debtors.
 
For more information on this topic please contact Califf & Harper, P.C. by calling 309-764-8300 or 1-888-764-4999. This article is intended to provide general information regarding the topic discussed herein but is not intended to constitute individual legal advice.