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Timing is Everything When It Comes to Battling Your Creditors

Analysing the Numbers

When you cannot pay your bills, eventually you may be sued. Once you are sued, and a judgment is entered against you, a creditor can use the court system to seize your property and collect on the judgment. The creditor and creditor’s attorney have many legal tools in his or her arsenal to collect money to satisfy the judgment. In this newsletter, we have written about them before - wage garnishments, citations to discover assets and real estate levies to name a few. It is usually after a judgment or series of judgments have already been entered, that a client will walk through the door at Di Monte & Lizak and seek assistance. However, timing is everything, and in some cases, if you wait too long, it may be too late to take advantage of all of the state and federal statutory protections afforded to debtors.

Illinois offers several protections for individuals when a creditor is seeking to collect on a judgment. Each state is different in the amount of their exemption allowances. In Illinois, each debtor is given a $15,000 homestead exemption, and a $2,400 auto exemption, and a $4,000 wildcard exemption which can be used to protect any personal property, including funds in a bank account. However, these exemptions need to be exercised in court prior to a turnover order being entered by a judge.

The law in Illinois is clear; once a turnover order is entered, the debtor is divested of his interest in the property. This is true even if the debtor still is in possession of the property. So a debtor who has a used vehicle worth $2,200, has an exemption of the first $2,400 in equity of a vehicle. If he properly asserts his exemption prior to a turnover order being entered, the creditor would not be able to take and sell the vehicle to satisfy the money judgment. However, if the debtor fails to appear, or appears and does not properly exercise his exemption rights and an order is entered, the debtor loses his interest in the car. It will be sold to pay down the judgment against him.

In many instances, it is only after this turnover order is entered that the debtor decides to file a bankruptcy. While the bankruptcy would discharge the remainder of the obligation to that creditor, it cannot be used to save the automobile.

This is also true with a residential foreclosure. Many clients seek to use bankruptcy as a tool to save their home. Bankruptcy can be a very effective tool to save a home. Again, timing is everything. Once a property is sold at a foreclosure auction, the owner has lost his interest in the property, even if he files a bankruptcy before the sale is confirmed in the foreclosure court. When it comes to debt relief, the sooner you realize you are in trouble, the sooner you should come in to discuss your options with your Di Monte & Lizak attorney.

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