In re Mercedes Cervantes; Cervantes v. HBLC, Inc.

12 B 26295, 12 A 01630

The Court held that wages withheld pre-petition under an Illinois Citation to Discover Assets, and an order for installment payment of judgment, are not exempt assets and thus may not be recovered by the debtor as a preferential transfer. Personal property exemptions do not apply to wages that are required to be withheld in a wage deduction proceeding under Part 8 of Article XII of the Illinois Code of Civil Procedure. The issue before the Court was whether the same was true of wages withheld pursuant to a citation to discover assets, which is a special proceeding under Part 14 of Article II, as opposed to a wage deduction proceeding under Part 8 of Article XII. In holding that the debtor could not claim an exemption in wages withheld pursuant to a citation to discover assets, the Court based its decision on the language in 735 Ill. Comp. Stat. 5/2–1402(k-5) that directs the Court, in the event property held by a third party respondent is wages, to proceed as if a wage deduction proceeding had been filed. Accordingly, the Court granted the creditor’s motion to dismiss the preference action.

Date: 
Thursday, May 9, 2013