Illinois law provides several methods that creditors can use to collect on a judgment. The collectability of a judgment depends on carefully searching for the debtor’s assets and tracing any transfers of property that preceded the entry of the judgment. The collection process becomes more complex if the judgment debtor files for bankruptcy protection.
These are the principal tools at the judgment creditor’s disposal in Illinois:
- Supplementary Proceedings — Illinois has among the best set of laws to help creditors collect judgments. A citation to discover assets gives the creditor a single procedure that, among other things, (a) creates and imposes a “citation lien” that freezes all non-exempt personal property, (2) requires the debtor and third parties to disclose information about all of the debtor’s property, and (3) lets the creditor seize and liquidate the debtor’s property.
- Judgment lien — This type of lien attaches to the debtor’s real estate. It is created by recording a certified copy of the judgment order, or a memorandum of judgment, in the county where the property is located. The lien ensures that if the property is sold, the sale proceeds will be applied first to pay the judgment. Judgment liens can last for up to seven years and can be renewed.
- Wage execution — Also known as wage garnishment, this is a court order directing the debtor’s employer to withhold a portion of their wages to satisfy the debt. The amount that can be garnished is limited by federal and state law, typically not exceeding 15 percent of the debtor’s disposable earnings. Wage executions are continuous orders that remain in effect until the full amount of the judgment is paid or until otherwise terminated by the court.
- Fraudulent transfer claim — These claims arise when a debtor transfers assets to friends, family and/or other “insider” entities to hinder, delay or defraud creditors. Under Illinois’ Uniform Fraudulent Transfer Act (IUFTA), creditors can challenge intentionally fraudulent transfers or those marked by “badges of fraud,” such as transfer of assets to insiders, the retention of control over the property post-transfer and the transfer of substantially all assets before a substantial debt is incurred. If a transfer is deemed fraudulent, the court can unwind the transaction or order compensation for the value of the assets.
The debt collection process changes significantly if a judgment debtor files for bankruptcy protection. A bankruptcy filing creates an automatic stay, which typically halts all collection activities including enforcement of judgments, and requires all creditors to participate in the bankruptcy case. Creditors may file a claim in the bankruptcy court to protect their rights. However, a court-appointed bankruptcy trustee can step into the shoes of a creditor and use the IUFTA to avoid fraudulent transfers.
Andrew R. Schwartz is an experienced collection lawyer in Chicago and a member of Aronberg Goldgehn Davis & Garmisa. Mr. Schwartz concentrates his practice in helping judgment creditors use all tools allowed by Illinois law to devise and orchestrate debt collection strategies. To discuss your situation, please call our office at 312-755-3164 or contact us online at your convenience.
