How to Defend Yourself in a Citation to Discover Assets

by

Richard Fonfrias, J.D.
Chicago's Financial Rescue & Bankruptcy Lawyer
Fonfrias Law Group, LLC


A Citation to Discover Assets

If a creditor sues you for money and wins, the court gives the creditor a judgment against you. The judgment tells how much money you owe the creditor and orders you to pay it.

Following the judgment, the creditor may try to collect the money you owe by requiring you to appear before the court for a Citation to Discover Assets. During this proceeding, the creditor wants to discover the amount of your income and the value of your property that he can seize to collect the money you owe. The court may require that you bring to the hearing certain financial documents including tax returns, bank statements, and payroll stubs.

The Citation to Discover Assets Creates an Automatic Lien

The creditor will send you written notice spelling out your legal rights, as well as the date and time of your court hearing. The date of the hearing is called the return date. At that time, you must appear in court and answer questions asked by your creditor's lawyer relating to your income and property. If you don't come to the hearing - or if you don't have the documents that were requested - the judge could have you arrested and charged with contempt of court.

Once a Citation to Discover Assets is issued, a lien is automatically placed on all of your nonexempt property. This means you cannot make or allow any transfers of your nonexempt property. If you do, you may be subject to court penalties for failing to obey the citation.

If the creditor serves your bank with a Citation to Discover Assets, then the bank must freeze all of your accounts unless the funds are exempt. Then the bank must appear in court and you should attend the hearing to assert your rights of exemption. The bank may not give money to your creditor without a court order.

In addition to banks where you have money deposited, the creditor may serve other third parties that have assets that belong to you or assets that are due to you. These include, for example, as an insurance company that has not yet paid your claim and your employer who owes you wages.

Illinois Law Protects Some of Your Income and Property

The law specifies types of income and property that cannot be seized, which are called exemptions. Under Illinois law, you are allowed to keep:

1. $2400 of equity in a motor vehicle;
2. $1500 worth of equipment, machines, books and other items required in your work or profession;
3. Necessary clothing, a Bible, school books and family photos;
4. A general exemption of $4000, which you can use for any property you own;
5. The cash value of your life insurance policy, provided that the policy's beneficiary is a spouse or another person dependent on you;
6. Social Security benefits, unemployment compensation, disability benefits, and veteran's benefits;
7. Support, maintenance or alimony, limited to the amount reasonably necessary to support you and anyone dependent on you;
8. Up to $15,000 resulting from a personal injury award;
9. Your interest in a qualified retirement plan, which is a retirement plan permitted by IRS, such as a 401(k), pension, or IRA;
10. $15,000 worth of equity in property you occupy ($30,000 for a married couple), called a homestead exemption. You cannot exempt investment property;
11. Up to $360.00 per week of your take-home pay (after taxes).

What Your Creditor Gets

If the creditor determines that all of your income and property is exempt under Illinois law, then the Citation to Discover Assets will be dismissed and the creditor will get nothing.

If the creditor's examination is not complete, the court may continue the citation to a future date and may require that you return for more questioning.

If the creditor determines that you have income or property that is not exempt, the creditor may choose a court-ordered:

-- Payment plan in which you make regular payments to the creditor.
-- Wage garnishment, which forces your employer to withhold money from your paycheck to pay the debt.
-- Non-wage garnishment, which freezes your bank account and forces the bank to turn over your money to pay off the debt.

If a Creditor Gets a Judgment Against You, You Should Consider...

1. Paying the amount you owe...using a money order or certified check. (Do not pay in cash unless you get a signed receipt.) When you pay, make sure the judgment creditor signs a form called a Satisfaction and Release of Judgment. Then file this form at the Court Clerk's office. This shows potential creditors that you paid the judgment in full. Also, keep a copy for your records.

If the judgment creditor fails to sign the form - or refuses to do so - file a motion asking the judge to sign the release. The Court Clerk's office will tell you how to file the required papers and how to schedule the motion to be heard.

2. Setting up an installment payment plan. Put your suggested payment plan in writing and ask the judgment creditor to accept your plan. If the creditor agrees, this may save a lot of time and effort starting a garnishment proceeding or taking other action against you.

If the creditor does not agree to your payment plan, then file a motion with the court asking the judge to approve your installment plan. If the judge approves, he or she may stop all other collection methods against you while you make the payments. You should know that a court-ordered payment plan must be paid off within three years. Ask the Court Clerk how to schedule a motion to ask the judge to approve your plan. Your motion should include complete details about how you will pay off the judgment in installments.

Caution: Make sure you can pay the installment payments before you agree to them. If your payment plan becomes part of a court order, the judge can find you in contempt of court if you don't make the payments when they're due - and in the agreed-upon amount.

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