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This article will discuss debtor versus creditor rights after an order or judgment is obtained, the collection procedures available to creditors, and the exemptions available to the debtor.
Debtor Versus Creditor Rights
A person becomes a "debtor" when they owe a debt to another person or entity. A creditor is the person, organization, or company owed the debt. To obtain an order or judgment that establishes the debt owed, creditors will file a lawsuit to enforce their right to collect the sum of money owed, whether by contract or another right. The lawsuit to enforce the agreement relative to the debt owed provides the creditor with the legal authority to attempt collection. The governing document is the Order or Judgment, which outlines the creditor's amount to collect. Once this Order or Judgment is obtained, the creditor will pursue debt collection; this is called the post-judgment period.
Collection Procedures By The Creditor
There are several ways a creditor can attempt to collect a debt; these include wage garnishment, third-party garnishment, and citation proceedings. A wage garnishment allows a creditor to receive up to 15% of the gross paycheck of a debtor. A third-party garnishment is a document served upon someone holding the debtor's property. A third party may be a bank or other financial institution where the debtor has deposited funds.
A citation proceeding is how a creditor determines the debtor's assets in his possession. Under Illinois law, 735 ILCS 5/2-1402, a judgment creditor can serve a "Citation to Discover Assets" upon the debtor. This document is served upon the debtor and allows the creditor to inquire into the debtor's assets. The citation notice provides that a debtor has the right to assert statutory exemptions against certain income or assets of the judgment debtor, which may not be used to satisfy the judgment. For more information on more potential creditor claim situations read our articles: Claims Against Non Probate Assets: Are My Assets Safe From Creditors Inside a Living Trust? And Creditors’ Claims Against Life Insurance Proceeds
Real And Personal Property Of Debtor Exempt From Creditors
Although the creditor has various procedures to collect money judgments against debtors, there are specific real and personal property items exempt. Under 735 ILCS 5/12-1001, the statute itemizes all exemptions available to consumer debtors. The debtor is not expected to turn over all of their property to creditors. The Illinois General Assembly passed this law to allow individuals to retain a specific property for their personal use.
735 ILCS 5/12-1001 (a) – (j) lists all exemptions available to debtors. These exemptions allow debtors to keep some dignity and property necessary for normal daily living.
Debtor Property Exempt From Creditors
Here is a list highlighting some of the debtor property exempt from creditors:
- necessary wearing apparel, bible, school books, and family pictures
- up to $4,000.00 equity interest in any other property
- one motor vehicle-equity interest not to exceed $2,400.00;
- implements, professional books, or tools of the trade, equity interest not to exceed $1,500;
- professionally prescribed health aids;
- pension and retirement benefits;
- proceeds from a life insurance policy, endowment policy, or annuity contract IF payable to wife or husband, or child, the parent or other person who is dependent upon the insured;
- debtor's right to receive or property traceable to:
- an award under a crime victim's reparation law
- a payment on account of wrongful death
- life insurance payment
- personal injury settlement up to $15,000.00
- Any restitution payment made to persons under the federal Civil Liberties Act of 1988 and the Aleutian and Pribilof Island Restitution Act, P.L. 100-383.
- debtor's right to receive an award under Part 20 of Article II of this Code relating to crime victims award
- Money held in an account invested in Illinois College Savings Pool.
A debtor is not compelled to turn over ALL of their personal property to creditors to satisfy a debt. The debtor can keep up to $15,000 equity in a home, $2,400 equity in an automobile, $1,200 in tools of the trade, and an additional $4,000 in other property. And the debtor can claim other property is exempt. The courts strictly follow the debtor's right to assert any or all of the above exemptions. The debtor may be compelled to list all income and assets and produce supporting documents at the citation hearing but will be allowed to assert their statutory exemptions.
This article provided an overview, not intended to be an exhaustive review, of creditor and debtor rights. If you have questions regarding your rights in, don’t hesitate to get in touch with one of our experienced Illinois lawyers at 630-324-6666.
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