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Which Types of Federal and State Benefits Are Creditors Not Allowed to Garnish?When all other attempts to collect a debt have been unsuccessful, a creditor may be left with only more drastic measures, such as wage garnishment. You cannot garnish a debtor’s wages until after you have filed a lawsuit against the debtor and the court has found in your favor. With wage garnishment, you can order the debtor’s employer to divert a portion of their paycheck to you in order to repay their debt. You can also freeze the debtor’s bank account in order to garnish money without the debtor being able to withdraw it. However, there are some sources of income that you cannot collect from. For instance, many federal and state benefits are exempt from garnishment.

Which Benefits Are Exempt?

Federal and state laws protect individuals’ benefits from both garnishment and deduction. In Illinois, exempt benefits include:

  • Unemployment compensation and benefits
  • Social Security and Social Security Insurance
  • Public assistance
  • Disability benefits
  • Retirement benefits and pensions
  • Veteran’s benefits
  • Child support and spousal maintenance
  • Awards from personal injury lawsuits

Garnishment is allowed on protected benefits when it applies to certain debts, such as unpaid child support, federal student loans, and income taxes.

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Technicalities Do Not Quash Garnishment in Debt Collection CaseObtaining a judgment order against a debtor gives you the authority to enforce your debt collection. However, your debtor may continue to fight your collection efforts, based on legal technicalities and new claims. Thus, the legal battle against your debtor is not finished until you have received the money you are owed.

Recent Case

In MI Management v. Proteus Holdings, the plaintiff is a creditor who appealed multiple Illinois circuit court decisions that:

  • Quashed garnishment orders against a debtor;
  • Vacated a third-party citation to discover the debtor’s holdings in a bank; and
  • Granted a third-party creditor’s adverse claim to the debtor’s holdings.

In 2014, the plaintiff received a favorable judgment against two individual debtors and their company for breach of a $1.25 million promissory note. The plaintiff issued wage and non-wage garnishment summons against the debtors, who did not respond or appear in court. The court granted conditional garnishment judgment orders, which were later confirmed after the debtors continued to not respond. The plaintiff issued citations to discover assets to the debtors and their bank.

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Using Non-Wage Garnishment to Collect DebtsWhen Illinois creditors use court action to retrieve debts, they can collect from debtor wages or other assets. With some exemptions, creditors can claim part or all of a variety of assets and properties. Non-wage garnishment can give creditors access to assets of greater value than what can be deducted from a debtor’s wages, as long as the assets are not exempt.

Bank Accounts

Banks are the most common source for non-wage garnishment. Once a court affirms that a debtor is liable, the creditor can serve the debtor and the debtor’s bank with a garnishment notice. Once it receives the notice, the bank must freeze the debtor’s accounts until a court rules on the garnishment. Banks will typically receive the notice a couple of days before the debtor to prevent the debtor from avoiding garnishment by withdrawing money from an account.

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Illinois Creditors Bar Association Chicago Bar Association Illinois State Bar Association
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