Enforcement of Judgments
How Do You Collect a Judgment in Illinois?
Answer: you serve a citation to discover assets on the judgment debtor, the person or company the court entered judgment against.
People rush into court when they feel wronged to get a judgment against the person or company that damaged them. It can take years to reach the award of a judgment.
A judgment is a decision made by a court in a lawsuit and obtaining a judgment means recovering any money that is owed by another party as provided by the terms given by the court in the judgment.
That being said, a judgment that you can’t collect on is worthless to the judgment creditor. The purpose of this webpage is to offer you a practical approach on maximizing collection efforts to get the best recovery on your judgment.
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The Citation to Discover Assets
Ask any creditors’ rights or debt collection attorney in Illinois, they will assure you that the citation to discover assets (commonly called a Citation) is the main post-judgment collection procedure.
A Citation can be used to obtain an order that could be entered in a garnishment proceeding. It can also be used to enter a Charging Order against the distributional interest of the judgment debtor who has an interest in an LLC, and others that are similar.
In essence, the citation to discover assets is a tool to discover, freeze and recover assets, which is available for the judgment creditor.
Above all, the citation to discover assets creates a continuing lien, or freeze on the assets. This is different from a traditional garnishment. It provides the ability for the judgment creditor’s attorney to discover assets that belong to the judgment debtor, pursuant to the liberal construction of the citation to discover assets statute in Illinois, which he believes that a respondent is in possession of the judgment debtor’s assets.
The citation need not only be directed against the judgment debtor, but anyone that may have assets of the judgment debtor – for example a bank where the debtor has an account. The lien does not affect the respondents’ rights in property prior to service of the citation on them and it does not affect a lender or a bona fide purchaser’s rights who did not receive notice of the citation.
The lien takes effect immediately after it has been served on the respondent, who is either the judgment debtor or a third-party. As such, it is a violation of the citation lien if any transfers of funds are made after receipt of the citation, without prior consent from the court for such transfer or disbursement.
If the respondent is a third-party (for example a bank), it is very important that the third-party provides answers and responses to the citation, even if it is not holding assets of the judgment debtor. A conditional judgment can be entered against the respondent for the full balance of the judgment if the respondent fails to answer the citation.
A creditor’s attorney should follow specific steps in obtaining a conditional judgment, such as service of a summons to confirm the conditional judgment following petitioning the court for such relief.
If the third party respondent fails to answer the citation after such service, and even after no action has been taken by the third party after confirmation by the creditor, the judgment will be entered against them where the creditor can collect from the third party for the entire amount! So if you get served with a third party citatio by a judgment creditor in Illinois, answer or else!
The citation to discover assets does not end there. Illinois courts have more often than not held that a fraudulent conveyance action could be pursued in a citation proceeding under 735 ILCS 5/2-1402(c)(6). For example, the court permitted the citation to reach the indebtedness to the corporate debtor created when corporate funds were used to pay personal expenses of the corporation’s officers.
The citation to discover assets can also be used to force the judgment debtor to sell non-exempt assets to satisfy the judgment as well as appointing a sequester to sell certain types of property for which there is a limited market.
Not all assets in Illinois are subject to Citation liens – only non-exempt assets. Such As:
- Homestead credit ($15,000)
- Wild card exemptiong ($2,400)
- Retirement Accounts
- Motor Vehicles ($2,400)
- several others listed under (735 ILCS 5/12-1001)
Additionally, Illinois recently enacted a new citation lien procedure which provides for enforcement help for judgment creditors. The amendment can be found at 735 ILCS 5/2-1402(k-10) which now provides that a judgment creditor who discovers property of the judgment debtor subject to the lien of a citation to discover assets may ask the court to impress a lien against a specific item of personal property, including a beneficial interest in a land trust.
Special Procedures for Collecting on Judgments
These are some collection procedures that are not so complicated or used as often as the citation to discover assets or garnishments, which may be considered for collecting on judgments.
Memorandum of Judgment – Judgment Liens on Real Property
Be sure to record a final and valid judgment against any real property owned by the judgment creditor by having a Judge sign a memorandum of judgment which will subsequently be recorded in the recorder of deeds where the property is situated.
This creates a judgment lien on the debtor’s real property and the property will need to be settled and released before it can be sold. Under Section 12-101, of the IL Code of Civil Procedure, a judgment is a lien on real property from the date a memorandum of judgment is properly recorded until 7 years from the entry of judgment unless the judgment is revived.
Do ensure to record the judgment order if the judgment debtor does not own real property (or have no knowledge of any), so it attaches to the debtor in their own capacity so that it will reflect on their credit report until satisfied.
Charging Order: Enforcing a Judgment against an LLC Member
Section 30-20 of the LLC Act (found at 805 ILCS 180/30-20) states that a creditor’s exclusive remedy is to obtain a charging order against an LLC members distributional interest.
Illinois courts have held that this is a special remedy designed to allow a creditor of an LLC member to realize the value of the debtor’s distributional interest in the LLC and also protect both the LLC’s ability to function and the other members LLC interest.
A motion requesting a Charging Order on the LLC member’s distributional interest must be filed by the judgment creditor with the Court. It is not necessary to name the LLC as a party defendant in this post-judgment action.
The purpose of this charging order is to put a lien on the debtor’s LLC interest and to ensure that any distribution that is due to the debtor can be paid to the creditor.
This lien can also be foreclosed by the creditor and sold at a Sheriff’s sale or a private sale, just like any other asset sale. It is to be noted that distributional interest does not include salary, wages, draws or reimbursements.
As such, for best practice, the creditor should file a citation to discover assets at the same time for the above listed assets together with a charging order on the distributional assets.