The United States abolished debtor's prisons in the 1830s. Less-than-scrupulous debt collectors are using a loophole in Illinois state law to bring them back. The difference between the 1830s and the 2010s is that now, debtors are being jailed for failing to respond to collection hearings or for failing to pay fines assessed against them.
When a creditor obtains a money judgment against an Illinois debtor, it will generally issue a "citation to discover assets." This procedural maneuver requires the debtor to appear in court, be sworn in, and answer questions about his or her assets. If the debtor does not appear, a "rule to show cause" may be issued. This means that the debtor must provide the court with a valid reason for missing the citation to discover assets date. If the debtor does not appear in court on the rule to show cause, then the judge may issue aa civil attachment order for contempt of court.
Reports of this practice have been making the rounds in the media lately. Illinois Attorney General Lisa Madigan has gone on the record stating that these "illegal abuses" of the law must stop. On March 29, the Illinois House passed HB 5434, the Debtor's Rights Act of 2012, which is designed to stop these debt collection practices.
The changes would require notification of a citation to discover assets to better disclose exemptions to debtors and also require that creditors provide a worksheet to allow a debtor to prepare for a citation hearing. Most importantly, the changes would prohibit the issuance of a body attachment unless the debtor is served with the notice of the rule to show cause.
This service must be either personal or abode service and it must be made by the sheriff or other permitted process servers. Personal service occurs when a debtor is personally handed the notice of the rule to show cause. Abode service occurs when a member of the debtor's family who resides at the debtor's residence is served with the notice of the rule to show cause. Effective abode service also requires that a copy of the notice be mailed to the debtor as well.
If this bill is signed into law, it should go a long way towards stopping this practice. The added service requirements mean that debtors receive more specific, documentable notice of the proceedings. Those who fail to heed that notice must still be given an opportunity to appear in court before the body attachment can issue.
These added consumer protections are great, but one can never discount the power of a well-planned bankruptcy in situations such as these. If creditors already have judgments against you, it may be worthwhile to consider filing a Chapter 7 or Chapter 13 bankruptcy. Until this bill passes the Senate and is signed into law, the automatic stay and the discharge injunction remain powerful protections. Even after this law passes, it simply provides another layer of protection that is bolstered by the automatic stay and the discharge injunction. Again, if you are already at this stage of collections, it is probably high time to consider a bankruptcy.