How to Defend Yourself in a Citation to Discover Assets

How to Defend Yourself in a Citation to Discover Assets

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.

Steps to Follow When You Reach the Court Hearing

Step #1: Arrive at court on the date, time and place specified in the court papers as your return date.

Step #2: Check the list of court cases scheduled for that day and remember your case’s number.

Step #3: Enter the court room and check in with the court clerk, who will place you under oath before you answer questions.

Step #4: The creditor’s lawyer will ask you questions about your income and property.

Step #5: You respond to the lawyer’s questions and if your income or property is exempt from seizure, you explain to the creditor’s lawyer what exemptions you claim.

Step #6: When the lawyer finishes asking you questions, ask if you are free to go – or whether the lawyer will be calling your case before the judge. If the lawyer decides to call your case, then you must wait in court until you’re called. As a rule, your case will be called if you have agreed to a payment plan or if the creditor wants more information.

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.

How the Creditor Seizes Your Wages

If you do not pay the judgment, then the creditor(s) may have your wages garnished and sent to the creditor.

Before a creditor can take money from your wages, he must file an affidavit with the court clerk. The creditor must assert that your employer owes you wages that you have not yet received. Also, the creditor must certify that, before filing the affidavit, he sent you notice that money would be deducted from your wages.

At this time, the creditor must file written questions, called interrogatories, with the court clerk and also send them to your employer. The purpose of these questions is to learn how much money you earn in a pay period and to help the creditor calculate the amount of your wages he can deduct that are not exempt.

Next, the court clerk serves your employer with a summons that tells him when to file answers to the interrogatories and when to appear in court for the hearing. Your employer must respond by filing answers to these questions with the court and sending a copy to you.

After that, your employer must deduct from your non-exempt earned wages or future wages the amount of money you owe, not exceeding the amount of the judgment. The court will decide, at the next hearing, whether the money your employer withheld should go to the creditor.

If You Receive a Wage Deduction Notice…

… pay close attention to your paycheck to make sure your employer is deducting the proper amount from your wages. The maximum amount that may be deducted is one of these two amounts, whichever is less: the amount of your weekly take home pay that is over $360 or 15% of your weekly gross income. In addition, your employer is permitted to withhold a small amount for the time required to garnish your wages.

If your employer is deducting too much, discuss the matter with your employer. If your employer won’t correct the problem, you may arrange to have a hearing on the matter before the return date on the wage deduction summons. You will need to notify the judgment creditor and your employer about the date and time for the hearing in writing. At the hearing you will need to show the judge what your wages are, how much your employer is deducting, and why the amount is more than the law allows.

If you have a single creditor garnishing your wages, it is against the law for your employer to retaliate against you because he is withholding money to pay your creditor. However, this applies if only one creditor is garnishing your wages. If two or more creditors are garnishing your wages, you are no longer protected and your employer may suspend or fire you.

How the Creditor Seizes Other Property

In addition to your wages, a creditor who has a judgment against you may take non-exempt money, such as money that is in your bank account. Also, the creditor can seize money that is owed to you by another person or a business, such as an insurance company.

To take money other than your wages, the creditor must follow a process similar to garnishing your wages. First, the creditor must file an affidavit with the court clerk stating that he thinks your bank, or another person or company, either has your money or owes you money. Then the creditor sends you a copy of the garnishment notice that he files with the court.

In addition, the creditor files questions (interrogatories) with the court clerk, which the person or company must answer. In the answers, your creditor learns how much of your non-exempt cash or assets the person or company has in its possession.

Next, the court clerk gives your creditor a garnishment summons, which it serves on the person or company holding your assets. In the summons, the person or company learns when he has to provide answers to the questions and when the court will hold the next hearing. Then the holder of your assets must freeze non-exempt money or assets and do whatever the court orders it to do. At the hearing, the judge will decide whether the assets should be given to the creditor – or whether the funds are exempt. If the judge determines they are exempt from garnishment, then he can release them to you.

If you want to keep the bank from freezing your assets, then make sure you withdraw the money before the bank receives the garnishment summons.

If you own real estate, the creditor can put a lien on your property for the judgment amount and interest. In some cases, the lien gives the creditor the legal right to have your property sold to pay the judgment. The lien stays in effect for seven years from the time it is placed on the property or renewed. If you want to sell your property, you must first pay the judgment.

The Bank May Freeze Only Non-exempt Funds

The bank is not permitted to freeze money in your account if the funds are exempt. In all likelihood, the bank will not know the status of your funds. If your funds are frozen and if they are exempt, be sure to tell the bank and the creditor. Social Security and most government benefits are exempt. So if the funds in your account are all from government benefits, then your entire balance is exempt.

After you give the bank notice, if it won’t remove the freeze from exempt money, then you can go to court and ask the judge to order the bank to release your funds.