Debt Collection: Exemption Rights

PrintPrint   EmailEmail   

Author: Attorney Desk Reference Manual
Last updated: September 2012

Money and Property Exempt From Judgments (Exemption Fact Sheet)

Statutes
What Exemption Laws Do and Do Not Protect
Personal Property (Other than Wages) Exempt From Collection or Attachment
Exempt Wages
Putting Money From Exempt Sources in the Bank
How to Claim Exemption Rights

Back to Debt Collection Table of Contents
Back to Consumer Law Table of Contents
Back to Attorney Desk Reference Manual Table of Contents

Statutes

Exemption of Personal Property, 735 ILCS 5/12-1001 et seq.

Maximum wages subject to collection, 735 ILCS 5/12-803

What Exemption Laws Do and Do Not Protect

These laws protect some of a debtor’s income and property from collection by creditors.  The idea behind the exemption laws is to allow consumers to keep the basic necessities of life.  They give consumers very important rights, particularly after a court judgment where the creditor seeks an order to seize a consumer’s property.  A creditor cannot make a consumer give up exemption rights such as by putting in some small print in a contract.  Such clauses are illegal under federal law.

However, exemption laws do not protect the debtor when a creditor wants to repossess an item of property in which the creditor has a security interest.  For example, if the consumer puts up a car as collateral on a loan, the creditor can take the car if the consumer defaults, even if the car is an exempt asset.

Personal Property (Other than Wages) Exempt from Collection or Attachment

The following personal property is exempt from collection or attachment:

  • The consumer’s (or his/her family’s) clothing, bible, school books, and family pictures.
  • Up to $4,000 in value of any other property of the consumer’s choice.

This is informally known as the WILD CARD exemption because the consumer can identify one or more items of property for which s/he wants the exemption applied. For example, if a creditor tries to garnish her bank account which has $500 in it, she can claim the entire account as coming within the wildcard exemption.  That means she is left with another $3,500 to exempt other personal property.

Also, only the equity interest in the property is counted towards the $4,000 limit.  For example, if the consumer wants to apply the wild card exemption on one of her cars which is worth $5,000.  If she still owes the bank $4,000 on the car, her equity interest is only $1,000.  Since her equity interest is less than the amount of the wildcard exemption, she can use the wild card to totally exempt the car. She can use the $4,000 wildcard to add exemption value to other exemptions shown below.

  • The consumer’s interest in any one motor vehicle, up to $2,400.

For example, the consumer wants to use her exemption rights to protect her car from being taken by a judgment creditor, but her equity interest in the car is $3,000. She can claim up to $2,400 of it under this exemption, and $600 of it under the wildcard exemption in order to totally exempt the car.

  • Any implements, professional books, or tools of the trade, up to $1,500 in value.
  • The consumer’s right to receive certain types of government benefits or assistance.

This exemption covers government benefits such as Social Security, unemployment compensation, public aid, veteran’s benefits, and other forms of public assistance. 

  • Any disability, illness or unemployment benefit from an employer, an insurance company, or any other source, including workmen’s compensation benefits.
  • A consumer’s right to receive alimony, maintenance or support payments, including payments for support of any dependent.
  • A consumer’s right and interest in a retirement plan, such as a pension plan or annuity.
  • Various other forms of property are exempt under the law, including:
    • Life insurance benefits payable to the consumer as a result of someone’s death.
    • Payments of money for the wrongful death of a person who supported the consumer.
    • Payments of money due to a personal bodily injury which the consumer sustained (up to $7,500).
    • An award under the crime victim’s compensation law.
    • Money due the consumer from the sale of any of his property which was exempt at the time of sale.

Exempt Wages

In connection with a wage deduction (garnishment) proceeding, only part of a judgment debtor’s wages can be deducted and withheld from him/her.  The employer cannot deduct from the weekly take-home pay (after taxes and Social Security are deducted) any amount that is 45 times the federal or state minimum wage,whichever is greater.  The federal minimum wage is $7.25 per hour, the state minimum wage is $8.25.  The debtor will be entitled to take home, without a wage deduction, at least $371.25 of his/her wages per week.

If the consumer nets less than this amount, no wages can be deducted.  If he nets more than this amount per week, the employer can deduct the smaller of the following two amounts:

  • 15% of his weekly gross wages, or;
  • the amount of his take-home pay over and above [45x state minimum wage].

In addition, the employer may withhold an additional small amount as a fee for its services in responding to the wage deduction process.

Putting Money from Exempt Sources in the Bank

If money from an exempt source (e.g., Social Security) is deposited into a bank account, it remains exempt.  However, to protect the money in the account, the consumer must be able to show that the funds in the account are all exempt.  If both exempt and non-exempt funds are in the account, it becomes very difficult to protect the account from garnishment.  Therefore, if the consumer keeps his/her money in a bank, the comsumer should keep the money from the exempt source in a separate account.  The person should not deposit non-exempt funds into that account.  If a creditor attempts to garnish money from that account, follow the instructions in the section of this manual on garnishment.

How to Claim Exemption Rights

Money and Property Exempt From Judgments (Exemption Fact Sheet)

The creditor may try to enforce a judgment using collection procedures such as the Citation to Discover Assets or the garnishment process.  When that happens, the consumer should consult or retain an attorney.  If the creditor is trying to collect exempt money or property, the debtor may have to go to court to assert exemption rights.  The notices the debtor receives will explain exemption rights and how to get a court hearing.  If the debtor does not get the notices from the creditor, the debtor should try to obtain them from the creditor’s attorney or from the court.

Hearing

In general, to obtain a hearing on exemption rights, the debtor should notify the Clerk of the Court in writing before the scheduled return date on the citation or the garnishment.  The Clerk will give a date and time to appear before a particular judge.  The Clerk will also give the necessary forms to prepare and send to the creditor and to any garnishee, regarding the time and location of the hearing.  (The garnishee is the person, bank or employer holding the property which the creditor is trying to get.)  If the debtor prefers, he can also get a hearing by appearing in court on the return date.  Sometimes it is advantageous to get the hearing sooner, particularly if the bank account is frozen or if employment checks are being deducted.

When the debtor appears at the hearing, they should:

  • Be prepared to identify for the judge the particular property the debtor believes is exempt.
  • Be prepared to tell the judge the reason why the property is exempt.
  • In the case of a wage deduction, use the formula discussed above to determine the maximum amount of wages that can be deducted.  Calculations should be put in writing in a way the judge can understand.
  • In the case of a non-wage garnishment, identify which funds held by the garnishee are exempt and the reason they are exempt.
  • If the debtor has disclosed certain income or assets to the creditor on a Citation to Discover Assets:
    • Tell the creditor (or their lawyer) which of those items are exempt and which of those items are selected under the wildcard exemption.
    • Do not allow the creditor or the creditor’s attorney to present a turn-over order to the judge before there was an opportunity to review that order.
    • The judge should be told if it appears that the language on the order seems to turn-over property which is exempt.

Back to Top
Back to Debt Collection Table of Contents
Back to Consumer Law Table of Contents
Back to Attorney Desk Reference Manual Table of Contents

Printed from: www.illinoislegaladvocate.org/index.cfm?fuseaction=home.dsp_content&contentID=297

Feedback

We welcome your comments and suggestions