Taking a civil judgment is a significant step toward getting paid, but it is not always the final step. The debtor may refuse to pay the amount ordered by the court, forcing the creditor to take collection measures. This can become extremely difficult when the debtor appears to be judgment proof.
Judgment proof debtors are often unemployed and have no substantial assets that might be sold off to pay the outstanding debt. However, a debtor need not be totally destitute and/or have no income in order to be judgment proof. Under a variety of state and federal laws, certain income streams — such as child support payments and social security benefits — are exempt from garnishment. Similarly, certain property may be partially or fully exempt from seizure to pay civil judgments (e.g. a homestead exemption on a residence, retirement funds and certain life insurance policies). When judgment debtors’ income streams and assets are entirely exempt, they are considered judgment proof.
Some debtors only appear to be judgment proof. They may have sufficient non-exempt income and assets to pay the judgment but choose to hide those assets. This is where a skilled collection attorney can prove invaluable. There are many public and private sources of information about a debtor’s potential income and assets and their locations.
A citation to discover assets under Illinois law provides a powerful debt collection “toolkit.” It lets the creditor force the debtor and third parties to produce documents relating to the judgment debtor’s assets, and then conduct “citation examinations.” A citation puts the force of law behind a civil judgment. Citation examinations occur under oath. A judgment debtor or third-party respondent who skips the hearing entirely is subject to being held in contempt of court. A debtor or third-party respondent who misrepresents or fails to fully disclose financial information during a citation examination may be subject to fines and imprisonment and even to a charge of contempt.
Even if the debtor is truly judgment proof, the creditor is not always out of luck. The debtor’s circumstances may improve over time. If the judgment has not expired by the time the debtor’s financial position has changed, the creditor may still be able to collect.
Schwartz & Kanyock, LLC in Chicago provides debt collection serviced throughout the metropolitan area and throughout Northern Illinois. If you have a collection issue, please feel free to contact us online or call 312-436-1442 for an initial consultation.