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Illinois Collection Laws

I live in Illinois. What are my rights in debt collection?

A debt collector is threatening to garnish my wages, but I live in Illinois and I did not think that was allowed. What are my rights?

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Updated: Oct 10, 2014

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Highlights

  • Illinois allows wage garnishment and account levies.
  • The Illinois statute of limitations on credit card debt is five years.
  • Consult with an attorney to learn more about your rights and liabilities.

A collection agent or law firm that owns a collection account is a creditor. A creditor has several legal means of collecting a debt. But before the creditor can start, the creditor must go to court to receive a judgment. See the Bills.com resource Served Summons and Complaint to learn more about this process.

The court may decide to grant a judgment to the creditor. A judgment is a declaration by a court that the creditor has the legal right to demand a wage garnishment, a levy on the debtor's bank accounts, and a lien on the debtor's property. A creditor that is granted a judgment is called a "judgment-creditor." Which of these tools the creditor will use depends on the circumstances. We discuss each of these remedies below.

Illinois Compiled Statutes are available online.

Illinois Wage Garnishment

The most common method used by judgment-creditors to enforce judgments is wage garnishment, in which a judgment creditor contacts your employer and require the employer to deduct a certain portion of your wages each pay period and send the money to the creditor.

In most states, creditors may garnish between 10% and 25% of your wages, with the percentage allowed determined by state law. Garnishment of Social Security benefits or pensions for consumer debt is not allowed under federal law, but may be allowed for child support. See the Bills.com Wage Garnishment article to learn more.

Illinois garnishment rules are complex, and are found in the Illinois Code of Civil Procedure, Article XII, Chapter 7: Garnishment and Part 8. Wage Deductions. The maximum wages, salary, commissions and bonuses subject to collection under a deduction order, for any work-week shall not exceed the lesser of (1) 15% of the gross amount paid for the week or (2) the amount by which disposable earnings exceed 45 times the federal minimum wage hourly wage or, under a wage deduction summons served on or after January 1, 2006, the minimum hourly wage prescribed by Sec. 4 of the Illinois Minimum Wage Law, whichever is greater, in effect at the time the amounts are payable (735 ILCS 5/12-803 and S. 1752, L. 2005).

In Illinois, Spouse A's earnings are free from the interference of Spouse B's creditors (750 ILCS 65/7). Child support garnishment limits are higher. Support of a spouse or dependent children have priority over all others (735 ILCS 5/12-808(c) and S. 1752, L. 2005).

In Illinois, 401(K) or other retirement funds are exempt from garnishment (735 ILCS 5/12-704 and 5/12-804).

Illinois Levy

A levy means that the creditor has the right to take whatever money in a debtor's account and apply the funds to the balance of the judgment. Again, the procedure for levying bank accounts, as well as what amount, if any, a debtor can claim as exempt from the levy, is governed by state law. Many states exempt certain amounts and certain types of funds from bank levies, so a debtor should review his or her state's laws to find if a bank account can be levied. In some states levy is called attachment or account garnishment. The names may vary but the concepts are the same.

In Illinois, a levy is called non-wage garnishment, and is allowed under 735 ILCS 5/12-701 et seq. Non-wage garnishment is allowed if the plaintiff possesses a legal instrument such as a notice commanding the financial institution of a claim against the account. Illinois 735 ILCS, 5/12-1001(b) exempts debtor's interest in $4,000 worth of personal property, including cash.

If you reside in another state, see the Bills.com Account Levy resource to learn more about the general rules for this remedy.

Illinois Lien

A lien is an encumbrance — a claim — on a property. For example, if the debtor owns a home, a creditor with a judgment has the right to place a lien on the home, meaning that if the debtor sells or refinance the home, the debtor will be required to pay the judgment out of the proceeds of the sale or refinance. If the amount of the judgment is more than the amount of equity in your home, then the lien may prevent the debtor from selling or refinancing until the debtor can pay off the judgment.

Under Illinois law, an outstanding judgment can become a lien on real estate in Illinois owned by the judgment debtor. A judgment lien gives the judgment-creditor the right, under certain circumstances, to have the property sold in order to satisfy the judgment (735 ILCS 5/12-101 et seq). The Illinois homestead exemption makes it difficult to sell the residence of the judgment debtor, however (735 ILCS 5/12-901 et seq).

If you reside in another state, see the Bills.com Liens & How to Resolve Them article to learn more.

Illinois Statutes of Limitations

Under Illinois law, the statute of limitations is governed by Article XIII 735 ILCS 5/ Limitations on an open account (i.e., credit card) is 5 years, and written contracts have a 10-year statute of limitations.

Collection agents violate the FDCPA if they file a debt collection lawsuit against a consumer after the statute of limitation expired (Kimber v. Federal Financial Corp. 668 F.Supp. 1480 (1987) and Basile v. Blatt, Hasenmiller, Liebsker & Moore LLC, 632 F. Supp. 2d 842, 845 (2009)). Unscrupulous collection agents sue in hopes the consumer will not know this rule.

Illinois Foreclosure

Illinois foreclosure laws are found in 735 ILCS 5/Art XV. Review Illinois laws to learn more about the rules surrounding foreclosure in this state, including deficiency balances. Illinois has no anti-deficiency rule. See also the Bills.com resource Mortgage Foreclosure Illinois to learn more about Illinois foreclosures.

Illinois Payday Loan Collection

See the Bills.com resource Illinois Payday Loan to learn how Illinois law protects Illinois payday loan borrowers.

Illinois Collection Agency Act

Debt collectors must obtain a license in Illinois. The Illinois Collection Agency Act (ICAA) mirrors the federal Fair Debt Collection Practices Act, but unlike other states, does not include original creditors. Violation of ICAA is not a criminal offense. If you have been victimized by a collection agency, file complaints with the:

  • Illinois Department of Financial and Professional Regulation
  • Illinois Attorney General
  • Federal Trade Commission

Consult with a lawyer to discuss filing an ICAA-based civil lawsuit against the collection agent. Some lawyers take these cases on a contingency basis, which means no out-of-pocket costs to you. ICAA's limits and prohibitions can be found in Illinois Chapter 225, Act 425.

Recommendation

Consult with a Illinois attorney experienced in civil litigation to get precise answers to your questions about liens, levies, and garnishment in Illinois.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

107 Comments

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  • EL
    May, 2014
    Ed
    I have a personal loan that was written off in 2011 for 16k. I was contacted in 2013 by a collection agency that bought the debt and wanted a settlement which I could not do. The collection agency said it would set up a payment plan, after negotiating with the agent I set up a payment I was comfortable with which includes 9.9.% interest. After paying on this for a year I see I have barely made $100 in principle payments. I have been researching the laws around the agency being able to charge me interest and can't find any information pertaining to the law. Does anyone have any details?
    0 Votes

    • BA
      May, 2014
      Bill
      I think you are asking for a citation to Illinois usury law, which can be found at 815 ILCS 205.
      0 Votes

  • CC
    Apr, 2014
    Chas
    I had recently been getting letters that I owed about $700 for some past medical bills, whatever was not paid by the insurance company. I reside in Kane County in Illinois. I've seen where some people recommend never speaking with a creditor over the phone and only do it via mail. Is there a procedure you recommend for doing this? Do you recommend ignoring all the calls and just doing mail? Is it ok to talk to them by phone first and ask them to send you additional information in writing? Thanks!
    0 Votes

    • BA
      Apr, 2014
      Bill
      We recommend your first step is to validate the debt. The next time the collection agent calls, or if you receive a written collection letter, gather all of the contact information about the collection agent as possible and send it a debt validation notice. We include a great deal of information on the page I just mentioned, so take your time when you read it so you understand the debt validation process and what it means when a collection agent fails to validate a debt.

      Negotiate a settlement to the debt only if a collection agent validates the debt properly. If you reach that point, then you can decide to handle these negotiations in writing or on the telephone.
      0 Votes

  • MC
    Jul, 2013
    Matt
    My brother recently had a judgment against me after an unpaid car loan. My parents recently died, and the bank took a lien on their house for future property he would gain. The problem is, the house is worth about 80K, while 70k is still owed on the house. After selling the house and paying off the mortgage, the profit will be split between the 4 of us. Does the bank have the legal authority to place a lien against his parents estate? Since it is not his "personal estate," was it legal for them to place a lien against the home when not controlled or owned by him?
    0 Votes

    • BA
      Jul, 2013
      Bill
      Your question concerns the intersection of two branches of law called remedies and probate. No two states have identical remedies laws and probate laws, so it is difficult to make even a general observation about how courts would resolve a situation like yours. Accordingly, the best person to answer your question is a lawyer in the state where your parent's property is located. Specifically, look for a probate lawyer in that state who has litigation experience. Most estates are probated without any controversy. You need a lawyer who's experienced in arguing a case before a judge.
      0 Votes

  • JR
    Oct, 2012
    Judy
    Our corp. bank account was "raided" by the bank because of a balance due on an old corp. credit card from 4 1/2 years ago. The credit card office is in Illinois - our corporation is in California. Does the bank have the right to raid a bank account to satisfy a credit card debt of over 4 years old? This raid was done without notice or correspondence from the bank. We just woke up one morning last week, check our account, and all of our money was gone. We had a -0- balance! Don't we have any rights left when dealing with big banks? JR
    0 Votes

    • BA
      Oct, 2012
      Bill
      Take all of the information you have to a lawyer in your state who has consumer law experience. He or she will ask you the following questions to learn more facts about the event you described:
      • Did the credit card issuer or its collection agent have a judgment against your business?
      • Was this event an account levy?
      • Is the credit card issuer in the same corporate family as your bank? (I am wondering if there is a right of offset issue here.)
      • Is the bank nationally chartered?
      • How is your business organized? (sole proprietorship, partnership, corporation)
      • Who signed the credit card agreement for the card in question?
      • Did the signer of the credit card do so as a corporate officer (assuming your company was a corporation), or sign it in a manner to give him or herself personal liability for the debt?

      With these questions answered, the lawyer will determine if the bank's seizing of the funds was in accordance with state and federal laws and the contract you signed when you opened the account. To the point, your lawyer will advise you if you can unwind the account levy, offset, or freeze.

      0 Votes

  • JW
    Aug, 2012
    jay
    I live in Illinois. I owe the State of California approx. $3000 in back taxes from when I lived there in 2008. They have levied my checking account and taken $325, which was all the money in the account. I have a US Bank checking account that was opened in California but never changed when I moved to Illinois because there is US Bank less than a mile away. Are my collection rights governed by Illinois or California? I assume the judgment was entered in a California court, but I haven't been served a Notice of Levy yet as this just happened today (I don't think a State agency has to send a summons or Notice to Appear). I'm pretty sure that Illinois law allows $2000 of a bank account or $4000 "wild card" to be exempted from judgment or attachment, but California law doesn't allow any of a bank account to be exempt. I couldn't find anything in 735 ILCS that exempts tax debt from being exempted (sorry that's so poorly-worded)
    0 Votes

    • BA
      Aug, 2012
      Bill
      The CA FTB has administrative powers which allow them to issue a Writ of Garnishment. Therefore they do not need a court judgment. They can cross state lines and garnish bank accounts in places other than California. If you feel that the debt is not legitimate then you can file an appeal with the CA FTB.

      Although Illinois law has collection exemptions for court judgments, tax levies are different. If you need legal advice, I recommend you speak to a lawyer.
      0 Votes