Page 1 - John Hundley 2007

Sharp Thinking

No. 1 Perspectives on Developments in the Law from The Sharp Law Firm, P.C. November 2007

Legislature Changes Laws on Enforcement of Judgments

By John Hundley, Jhundley@lotsharp.com, 618-242-0246

Statutory amendments effective Jan. 1, 2008 will make a variety of changes and clarifications in judgment
enforcement law in Illinois. Drafted with the support of the Creditors Bar Association, P.A. 95-0661 generally
favors creditors, but in many instances its clarifications will be beneficial to all sides. Highlights of P.A. 95-
0661 and our perspectives include:

1. The Illinois Banking Act, Savings & Loan Act, Savings Bank Act, and Credit Union Act are amended to
make clear that financial institutions may treat citations to discover assets like subpoenas, summonses, and
other court orders for the purpose of disclosing financial records relating to customers. As with those other kinds
of information demands, the institution will be permitted to disclose the demanded records but required to mail a copy of
the citation to the customer in advance. Moreover, the institution will be entitled to reimbursement for the costs of
compliance, just as if it was complying with a subpoena, summons, or court order. Because citations are court orders, the
amendments probably should be construed as clarifying rather than changing prior law. Where such procedures already
have been being followed, prior practice should not be construed as unlawful.

2. The citation statute (735 ILCS 5/2-1402) is amended to state that a “judgment creditor may recover a
corporate judgment debtor’s property on behalf of the judgment debtor for use of the judgment creditor by filing
an appropriate petition within the citation proceedings”. This really reiterates existing law (e.g., § 2-1402(c)(4) (a
citation court may "[e]nter any order upon or judgment against the person cited that could be entered in any garnishment
proceeding")). It is intended to distinguish the court’s right to order third parties to turn over a debtor’s property from
rulings that citation proceedings cannot be used to pierce corporate veils and reach assets of the third parties.

3. The citation statute is amended to provide that if property of the judgment debtor is discovered and it “is
of such a nature that it is not readily delivered up to the sheriff for public sale or if another method of sale is
more appropriate to liquidate the property or enhance its value at sale, the court may order the sale . . . by a
selling agent other than the sheriff”. This change should provide for better realization of value on items like art, where
a sheriff’s sale is ill-suited to attract buyers, and on property for which there are established alternative sale processes
(e.g., auto or livestock auctions) which automatically have a pool of interested potential buyers.

4. The citation statute will provide that the court may order the debtor to resign memberships in exchanges,
clubs, etc. This change is intended to reverse a case in which a judgment debtor thwarted the creditor’s attempt to reach
the value of his country club membership by refusing to execute the resignation which was a prerequisite to liquidating
such funds. The amendment thus reiterates the general principle that citation courts are broadly empowered to compel
judgment debtors to deliver up money, choses in action and other property – and to execute assignments – for application
in satisfaction of judgments. Note that in cases where rules provide that only the organization can handle the sale of a
membership, the change referenced in point 3 above permits the organization to be designated as the selling agent.

5. Costs incurred in enforcing judgments, such as for levy or replevin bonds, court order certification,
recordings and expenses in assisting a sheriff, are recoverable “costs” under the Code of Civil Procedure. This
confirms the better reading of prior law.

6. Citation statute is amended to make clear that if, in response to a citation, property is discovered which is

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Sharp Thinking is an occasional newsletter from The Sharp Law Firm, P.C. addressing developments in the law which may be of interest. Nothing contained in Sharp
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