We received a citation to discover assets for one of our customers directing us to freeze up to twice the amount of the judgment against them. We froze the funds in their account, then received a second citation to discover assets from a different creditor related to a different judgment against the same customer. We are unsure how to answer the second citation since we are in possession of funds belonging to the judgment debtor that are frozen. The funds in the customer’s account exceed the amount of the first judgment — but not by twice the judgment amount — so, depending on the amount we are asked to turnover for the first judgment, there may be some funds remaining to apply to the second judgment.

We recommend consulting with your bank counsel on how to answer a third-party citation, as we cannot provide legal advice. However, based on the information provided, we do not believe you are holding any unencumbered funds belonging to the judgment debtor.

A citation to discover assets acts as a lien on a judgment debtor’s personal property, including their bank accounts. A perfected lien is superior to any lien that later attaches to the assets; however, when the citation proceeding is terminated, the lien also terminates.

Since the first citation proceeding appears to be ongoing, and the funds in your customer’s account do not exceed twice the amount of the first judgment, we believe that all the property you are holding on behalf of this customer is encumbered by a lien. As a result, we do not believe you are currently holding any property that could be turned over to the judgment creditor in relation to the second citation to discover assets.

For resources related to our guidance, please see:

Illinois Code of Civil Procedure, 735 ILCS 5/2-1402(f)(1) (“The citation may prohibit the party to whom it is directed from making or allowing any transfer or other disposition of, or interfering with, any property not exempt from the enforcement of a judgment therefrom, a deduction order or garnishment, belonging to the judgment debtor or to which he or she may be entitled or which may thereafter be acquired by or become due to him or her, and from paying over or otherwise disposing of any moneys not so exempt which are due or to become due to the judgment debtor, until the further order of the court or the termination of the proceeding, whichever occurs first. The third party may not be obliged to withhold the payment of any moneys beyond double the amount of the balance due sought to be enforced by the judgment creditor. The court may punish any party who violates the restraining provision of a citation as and for a contempt, or if the party is a third party may enter judgment against him or her in the amount of the unpaid portion of the judgment and costs allowable under this Section, or in the amount of the value of the property transferred, whichever is lesser.”)

Illinois Code of Civil Procedure, 735 ILCS 5/2-1402(m)(2) (“The judgment or balance due on the judgment becomes a lien when a citation is served in accordance with subsection (a) of this Section. The lien binds nonexempt personal property, including money, choses in action, and effects of the judgment debtor as follows: . . . (2) When the citation is directed against a third party, upon all personal property belonging to the judgment debtor in the possession or control of the third party or which thereafter may be acquired or come due the judgment debtor and comes into the possession or control of the third party to the time of the disposition of the citation. . . . The lien is effective for the period specified by Supreme Court Rule.”)

Illinois Supreme Court Rule 277(f), Supplementary Proceeding (“When Proceeding Terminated. A proceeding under this rule continues until terminated by motion of the judgment creditor, order of the court, or satisfaction of the judgment, but terminates automatically 6 months from the date of (1) the respondent’s first personal appearance pursuant to the citation or (2) the respondent’s first personal appearance pursuant to subsequent process issued to enforce the citation, whichever is sooner. The court may, however, grant extensions beyond the 6 months, as justice may require. Orders for the payment of money continue in effect notwithstanding the termination of the proceedings until the judgment is satisfied or the court orders otherwise.”)
Midwest Commercial Funding, LLC v. Kelly, 2022 IL App (1st) 210644, ¶ 7 (“‘[O]nce a judgment creditor serves the judgment debtor with a citation to discover assets, a judgment lien is perfected on those assets of the debtor which are not otherwise exempt under law.’ Likewise, when the citation is directed against a third party, the judgment becomes a lien upon assets of the debtor in the third party's possession or control. A perfected lien is superior to any lien that later attaches to the assets.”)