October 02, 2018
Author: Lisa A. Petrilli
Organization: Sorling, Northrup, Hanna, Cullen and Cochran, Ltd.
I. Judgments Generally
A. The Judgment must be a final judgment.
Illinois Supreme Court Rule 304(a) states:
If multiple parties or multiple claims for relief are involved in an action, an appeal may be taken from a final judgment as to one or more but fewer than all of the parties or claims only if the trial court has made an express written finding that there is no just reason for delaying enforcement or appeal or both. Such a finding may be made at the time of the entry of the judgment. . . . In the absence of such a finding, any judgment that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties is not enforceable or appealable and is subject to revision at any time before the entry of a judgment adjudicating all the claims, rights, and liabilities of all the parties.
Creditors frequently attempt to enforce judgments that are not final pursuant to Rule 304. Generally, this happens where there is more than one defendant. When a judgment, commonly a default judgment, is entered against one party but not against the remaining parties, the judgment is not “final” unless certain language is included in the judgment order. For the judgment to be final, there must either be: (1) judgment as to all parties on all matters; or (2) compliance with Rule 304 making the judgment final. The words that will make a judgment as to fewer than all parties or all matters final is: “there is no just reason for delaying either enforcement or appeal or both.”
That same language will also make vacating a judgment more difficult. 735 ILCS 5/2- 1301(e), which relates to motions to vacate judgments less than 30 days old, and735 ILCS 5/2- 1401, which relates to motions to vacate judgments more than 30 days old, do not apply to a judgment that is not final.
Bank of Matteson v. Brown, 283 Ill.App.3d 599, 669 N.E.2d 1351, 218 Ill.Dec. 825 (1st Dist. 1996), is a frequently cited case that discusses attempts to enforce a judgment that is not final. In Bank of Matteson, the bank had a judgment against some, but not all, of the defendants. The bank then initiated a citation to discover assets to a third party bank which held an account of one of the defendants against whom judgment was entered. The bank failed to obtain a Rule 304(a) finding. The third party bank then failed to answer the citation, and the bank obtained a turnover order. The trial court refused to vacate the turnover order and the third party bank appealed. The appellate court reversed finding that the trial court lacked jurisdiction to initiate enforcement proceedings when the judgment was not final in accordance with Rule 304. This ruling is important as it holds that finality of an order is jurisdictional, and a proceeding based on a nonfinal order can be attacked at any time.
Prior to beginning post-judgment collections, a practitioner should determine whether the circuit court with jurisdiction has forms. Certain jurisdictions have suggested forms, but others have mandatory forms.
C. Family Law Matters
If the judgment being collected resulted from an order in a dissolution proceeding or other family law proceeding, the practitioner should consult the rules pertaining to those types of actions as they differ from collections in other civil matters.
The practitioner should develop procedures to ensure compliance with the bankruptcy laws which will be discussed in more detail later.
E. Current Law / Due Process.
There have been recent changes to the laws related to citations to discover assets, validation statements and other collection matters and the practitioner should confirm that she is in compliance with the laws which relate to the relevant post judgment procedure.
F. Validity of Judgments
Judgments are valid for 20 years.
II. Interest, Court Costs and Attorney Fees
A. Interest and Court Costs
1. Court Costs and Other Fees / Costs
Under 735 ILCS 5/5-105(a) all clerks’ and sheriffs’ fees are chargeable as court costs. Additionally, reasonable service fees where a process server was used for service are chargeable as court costs. Note that these fees must be reasonable and if the fees exceed an amount near what would have been charged by the sheriff, a creditor may have to defend those fees before the court will award the fees as costs. Under this same section the court must make finding that such witness fees and related expenses were “necessary to commence, prosecute, defend, or enforce relief in a civil action” before such expenses will be chargeable as court costs.
Additionally, pursuant to 735 ILCS 5/5-126.5 the plaintiff shall be allowed to recover as costs those expenses required by law or a law enforcement or court officer for the purposes of enforcing a judgment including levy bonds, replevin bonds, certification of court orders, recording certified orders or memoranda of judgment, and expenses for those assisting a sheriff or other court officer in enforcing court orders including, but not limited to, orders for possession, replevin orders, and personal property levies. Under this provision, a creditor may recover previously nonchargeable expenses such as the bonds listed above and expenses related to recovery of property beyond the service of the order by the sheriff (i.e. eviction movers, locksmiths).
2. Post Judgment Interest
735 ILCS 5/2-1303, states:
[j]udgments recovered in any court shall draw interest at the rate of 9% per annum from the date of the judgment until satisfied or 6% per annum when the judgment debtor is a unit of local government . . . or any other governmental entity.
The first step in determining post-judgment interest is to determine the amount of the judgment. The amount of the judgment is equal to the judgment, plus allowable court costs, plus any previously charged interest. Then if there are any payments or credits against the judgment, those should be subtracted. If there is a balance due after each payment or credit, you will have to recalculate the interest from the date of the judgment or from the date of the last payment / credit.
The amount of the judgment also includes the attorneys’ fees that are awarded by the court and as part of the judgment, interest accrues on such an award. Interest should be calculated to the date that counsel is making the calculations or filing the pleading. It should not be calculated to the return date of the wage deduction or garnishment because the debtor may satisfy the judgment prior to the return date, and the creditor is not entitled to unearned interest.
Calculations are generally based on a 365-day year.
All payments are applied first to accrued postjudgment interest and then to the principal judgment.
The common formula is:
(Judgment $ x 0.09) / 365 = per day amount of interest
Take the per day amount of interest and then multiply it times the number of days that have passed between the date of judgment and the date that counsel is filing the pleading.
B. Attorney Fees
Attorneys fees are not a matter of right. Fees should not be added to the judgment until approved and ordered by the Court. Frequently, this will occur in a later hearing with the result being two separate judgment dates. To obtain fees, the debtor must have requested fees as part of its prayer for relief in the complaint. The issue of fees may be decided at the trial or may be later decided by the court.
In Sangamon County, attorney fee hearings are generally held after the judgment is entered. Following judgment, the prevailing party submits a petition for fees which is supported by a affidavit attesting to the fees incurred. At the hearing, opposing counsel may question the attorney as to the reasonableness of the fees incurred.
The creditor may be able to obtain attorneys’ fees for postjudgment collection efforts if provided by statute or pursuant to a contractual attorneys’ fee shifting provision found in the contact on which judgment was entered. The availability of attorneys’ fees in such circumstances was unclear until Poilevey v. Spivack, 368 Ill.App.3d 412, 857 N.E.2d 834, 306 Ill.Dec. 435 (1st Dist. 2006), was decided. Prior to Poilevey, the contract and its attorneys’ fees provision merged into the judgment and that the merger doctrine barred asserting the contractual attorneys’ fees provision in postjudgment proceedings. Poilevey clarified that postjudgment attorneys’ fees are ancillary to the original judgment and that the merger doctrine therefore did not apply. Id., citing Stein v. Spainhour, 196 Ill.App.3d 65, 553 N.E.2d 73, 142 Ill.Dec. 723 (4th Dist. 1990). In Stein, the Illinois Supreme Court held that attorneys’ fees provisions do not merge into a contract.
III. Voluntary and Court Approved Installment Plans
A. Voluntary payment plans
A voluntary agreement is one made between the creditor and the debtor with no court supervision. Such agreements typically are oral and made at the hearing or first appearance, with a follow-up letter confirming the agreement. A voluntary agreement cannot be enforced in court and does not provide a judgment creditor with priority over a creditor that obtains a later judgment but is the first to institute judicial collection procedures. These are the least favorable method of collection because of the problems with enforceability against the debtor and other creditors.
Generally, these agreements are only used where other enforcement proceedings would not be worthwhile. For example, where the debtor does not have sufficient wages to garnish or there are no bank accounts. If that happens, but the debtor wishes to pay the judgment from otherwise exempt assets, this type of agreement may be used. Another scenario where this type of agreement may be beneficial is where a third-party, such as a parent or spouse, will be making the payments. There is nothing prohibiting a creditor from accepting such payments from a party other than the judgment debtor, but those are not an enforceable obligation on the third-party. If you are accepting payments from a third-party, be certain to obtain permission from the debtor to discuss the debtor’s financial affairs to avoid violating privacy laws.
B. Note on Exempt Assets
An exempt asset should not serve as the basis for any judicially sanctioned payment arrangement, as a debtor cannot be held in contempt for failing to make payments out of exempt income and a court may not order payment from exempt sources. This is not to say that a debtor cannot agree to make payments from exempt income or that a creditor cannot accept payments from exempt income or assets. A debtor can waive his or her right to exemptions. However, the law will not enforce such an agreement in the event of a breach.
C. Agreed Payment Orders
The debtor and creditor may enter into an agreed court-ordered installment plan with a stay of enforcement. Commonly, such payment plans are entered into in citation proceedings under the authority of 735 ILCS 5/2-1402(c) or S.Ct. Rule 288 at time of trial. A court cannot compel a creditor to accept an installment plan in a case that is not a small claims matter. Silver Cross Hospital v. Campbell, 140 Ill.App.3d 746, 489 N.E.2d 405, 95 Ill.Dec. 184 (3d Dist. 1986). In small claims matters, S.Ct. Rule 288 authorizes a trial court to order installment payment of the judgment over the creditor’s objection. The sole requirement under Rule 288 is that such installment plans must provide for payment in full in three years or less. These installment orders stay enforcement of the judgment pursuant to the rule. In contrast, a payment plan under §2-1402 does not stay the enforcement of the judgment unless the order so states. As will be discussed in more depth later, the citation to discover assets procedure authorizes a trial court to enter an installment payment plan over the objection of the debtors. This tactic typically will be used in cases involving self-employed debtors or debtors employed in industries in which cash gratuities are the bulk of the debtors’ income (e.g., waiters or bartenders) because a wage deduction would be an ineffective mechanism for reaching all of such a debtor’s income.
D. Subsequent Actions by Other Creditors
Illinois Supreme Court Rule 288 allows the court to order the installment payment of small claims cases over the objection of the creditor. If a creditor is receiving payments pursuant to Rule 288, the judgment is not enforceable by supplementary proceedings. If the defendant defaults in the payments, the creditor may vacate the installment portion of the judgment order and proceed with wage deduction or ask that the defendant be held in contempt of court for failure to comply with the court’s order. The payment of small claims judgments has worked well for many years using this rule.
A problem may arise when a larger judgment creditor with a subsequent judgment, issues a wage deduction proceeding, and obtains 15 percent of the debtor’s gross wages. The debtor will likely no longer be able to make Rule 288 payments and will stop paying.
The creditor having the small claims judgment could argue that it is entitled to priority over the later wage deduction, attempt to vacate the installment portion of its order so that it may proceed with its own wage deduction, or attempt to have the court hold the debtor in contempt for failure to make the payments. A court is highly unlikely to hold a debtor in contempt under these circumstances. If the small claims judgment creditor asks the court to hold the defendant in contempt for failure to comply with the court order, the debtor will respond to the creditor’s petition for contempt by stating that his or her nonexempt wages have been seized by another judgment creditor pursuant to a valid court order; thus, the debtor has no nonexempt wages with which to comply with the court’s installment order through no fault of his or her own. Since the court cannot order payment out of the debtor’s exempt wages, it would be extremely hardpressed to find a debtor in contempt of court under these circumstances.
Vacating the installment order so that the small claims creditor can seek its own wage deduction is also undesirable. The small claims judgment creditor, if successful in vacating the installment order, would then have to issue a wage deduction proceeding that would be effective after the larger judgment creditor is satisfied. The small claims creditor still loses its proper priority under such circumstances.
Thus, the first option, attacking the priority of the later creditor’s wage deduction, is the preferred solution. If this problem arises, the earlier judgment creditor with the installment order should file a motion making an adverse claim to the property based on the prior court order under 735 ILCS 5/2-1402(g) (which invokes 735 ILCS 5/12-710) or 5/12-810, as the case may be. The Rule 288 order or other court-approved installment order should be considered a superior claim to the debtor’s income. However, the second creditor will be entitled to the balance of the debtor’s nonexempt income available for deduction, should any exist, and the court should enter such an order accordingly.
IV. Memorandum of Judgment
In order to obtain a memorandum of judgment, the debtor must first have a certified final judgment order or memorandum of judgment in a form that can be recorded with the county recorder in the county in which it is thought the debtor owns real estate. You will need to consult with the recorder’s office for the proper form. If a debtor is believed to own real property, this should be done immediately upon entry of judgment.
Be certain that all of the information in the memorandum of judgment is accurate. An appellate court dismissed a complaint to foreclose a judgment lien because the memorandum had the wrong date of judgment. Maniez v. Citibank, F.S.B., 383 Ill.App.3d 38, 890 N.E.2d 662, 321 Ill.Dec. 940 (1st Dist. 2008).
Some notes prior to enforcement of a memorandum of judgment. Pretty much every other post judgment enforcement action is simpler and less costly than a real estate levy. Recording a memorandum against real property is pointless if the debtor does not own real property, so if a creditor is unsure as to whether a debtor owns real property, efforts should be made (either in a citation proceeding or record search) to make that determination first. Additionally, a title search may prove helpful in notifying the creditor of existing liens. Generally, real property is mortgaged and debtors with judgments seem to have more than just one debt.
Title work should be ordered and a drive-by appraisal should be ordered prior to proceeding. These liens generally go unenforced as the value of the property and the priority lien holders prevent the possibility of collection. However, if the debtor attempts to sell the property, the memorandum of judgment will turn up in a title search and will generally have to be released prior to judgment. The creditor may negotiate a payoff with the debtor and / or be paid from the proceeds (if any) at the sale.
B. Homestead Exemptions at Sale
An additional immunity given a debtor’s real estate is manifested today in the estate of homestead. 735 ILCS 5/12-901 provides:
Every individual is entitled to an estate of homestead to the extent in value of $15,000 of his or her interest in a farm or lot of land and buildings thereon, a condominium, or personal property, owned or rightly possessed by lease or otherwise and occupied by him or her as a residence, or in a cooperative that owns property that the individual uses as a residence. That homestead and all right in and title to that homestead [are] exempt from attachment, judgment, levy or judgment sale for the payment of his or her debts.
The homestead exemption is not an exemption from attachment. Unlike the personal property exemption of or a cash equivalent, the estate of homestead is set aside and can be defined in terms of actual land such as farmland acreage. The debtor can transfer the estate and retain the proceeds as exempt. In most real estate levies, the judgment debtors have a homestead interest. The sheriff has to protect and set aside this interest if the sale and subsequent deed are to be valid.
C. Effecting the Sale
Where the debtor has a homestead right, the judgment creditor’s counsel prepares a direction to levy and notice of levy with sufficient copies for service and delivers them to the sheriff of the county in which the property is located. Consult with the sheriff’s office as to the appropriate forms and number of copies required.
The levy then must be served on the judgment debtor. Be certain this is served and not mailed to the debtor.
The sale proceeds according to 735 ILCS 5/12-910 and 5/12-911. Section 12-910 imposes a duty on the sheriff to determine if the property is worth more than $15,000. If the property is worth less than $15,000 and there is a homestead, there is no sale. In order to determine the value of the homestead, 735 ILCS 5/12-910 requires the sheriff to summon three individuals, as commissioners, who shall, upon oath, appraise the premises, and if, in their opinion, the property may be divided without damage to the interest of the parties, they shall set off so much of the premises, including the dwelling house, as in their opinions is worth $15,000, and the residue of the premises may be advertised and sold by such officer. Since typical urban and suburban residential houses cannot be divided, so there is almost never a setoff. The residence usually sits on almost all of the land.
Assuming the commissioners report that they cannot set aside property, then the sheriff is required to deliver a copy thereof to the judgment debtor, or to someone of the family of the age of 13 years or older, with a notice thereto attached that unless the judgment debtor pays to such officer the surplus over and above $15,000 on the amount due on the judgment within 60 days thereafter, such premises will be sold. This notice must also be personally served. The judgment debtor may pay the creditor the balance of the claim in excess of $15,000 and retain the property and cancel the sale. 735 ILCS 5/12-115 provides that there must be a minimum of three weeks’ publication and posting before a sale can go forward.
The judgment creditor has a right to bid whatever portion of the judgment is appropriate. However, the procedure generally followed is that the judgment creditor bids a part or all of its judgment plus a separate bid to cover homestead. For example, if the judgment was $5,000 and there was only one homestead, the judgment creditor would bid $5,000 plus $15,000 for the homestead for a total of $20,000. No cash would change hands on this bid until the creditor applied for the sheriff’s deed, at which time that successful creditor would have to post the $15,000. The successful bidder would have to pay the commission due the sheriff for conducting the sale.
At the sale, a certificate of sale will be given to the successful bidder. The homestead deposit does not have to be paid to the sheriff until the sheriff is requested to prepare the deed as referenced above. The certificate may be assigned.
D. Foreclosure of a Judgment Lien
735 ILCS 5/12-101 states:
As to real estate included within class two, a judgment is a lien on the real estate of the person against whom it is entered in any county in this State, including the county in which it is entered, only from the time a transcript, certified copy or memorandum of the judgment is filed in the office of the recorder in the county in which the real estate is located. The lien may be foreclosed by an action brought in the name of the judgment creditor or its assignee of record under Article XV in the same manner as a mortgage of real property, except that the redemption period shall be 6 months from the date of sale and the real estate homestead exemption under Section 12-901 shall apply.
This provision authorizes the foreclosure of a lien of judgment in the same manner as a mortgage foreclosure.
E. Judgment Lien Expiration
Judgment liens do not last for the full twenty years that the judgment is enforceable. The lien will expire seven years from the time it is recorded. 735 ILCS 5/12-101. However, real estate that has been levied upon within the seven-year period is allowed one additional year to be sold to enforce the judgment. 735 ILCS 5/12-108. Revival of a judgment is possible at anytime within twenty years from the date the final judgment was entered. 735 ILCS 5/13-218. As in the case of the original judgment, the revived judgment becomes a lien on the real property only upon recording of the judgment in the appropriate county. Just as the original judgment creates a lien when properly recorded, when a judgment is revived and the judgment lien is again perfected, that lien exists for an additional seven-year period. 735 ILCS 5/12-101. Be certain to revive liens prior to the expiration. The priority of an expired and then revived lien will be determined by the recording date of the order to revive, not by the date of the original recording of the judgment.