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Freezing Assets During an Illinois Divorce
When a divorce begins, there is a fundamental lack of trust between the two spouses. This lack of trust is especially strong when it comes to finances. There will always be suspicion that one spouse will try to hide of remove assets from the marriage. Because of this, parties will try to ask the court to freeze all of the marriage’s assets during the divorce until those assets can be appropriately allocated in the divorce process. So, how do you freeze assets in an Illinois divorce?
The Automatic Stay
In many states, there is an “automatic stay” in the statutes that prevents parties to a divorce from doing anything to diminish or conceal any assets.
In addition or in the alternative, other states also will allow judges to issue standing orders that are automatically issued at the beginning of a divorce case. Those standing orders can personally order the parties to a divorce to essentially freeze their assets until further order of court.
There used to be a provision in the Illinois Marriage and Dissolution of Marriage Act (750 ILCS 5/501.1), providing for the automatic restraint against transferring, encumbering or disposing of any property without bond the moment a divorce was filed until further order of court.
This provision of the act automatically freezing assets in an Illinois divorce has since been removed after the provision was found to be unconstitutional by the Illinois Supreme Court. Messenger v. Edgar, 623 N.E.2d 310 (Ill. 1993)
The court found that the provision was overly broad because there are almost always non-marital assets that would also be frozen under this Illinois statute.
Furthermore, any legal restriction by the state or a court must require “due process” under the U.S. constitution and the Illinois constitution. Due process is the fair application of the law.
The court held that automatically freezing someone’s assets without notice, hearing or even a signed affidavit by someone familiar with the facts is a direct violation of due process.
So, there is no automatic freezing of assets in an Illinois divorce.
Temporary Restraining Order or Preliminary Injunction
Assets can eventually be frozen in an Illinois divorce, just not automatically. A motion must be filed in order to freeze an asset in an Illinois divorce.
The Illinois statute says that with just a signed affidavit, you can request an order “restraining any person from transferring, encumbering, concealing or otherwise disposing of a any property except in the usual course of business or for the necessities of life” 750 ILCS 5/501(a)(2)(i)
To grant preliminary relief, the trial court must find that “(1) the plaintiff possesses a certain and clearly ascertainable right that needs protection; (2) the plaintiff will suffer irreparable harm without the protection of the injunction; (3) there is no adequate remedy at law; and (4) there is a substantial likelihood that the plaintiff will succeed on the merits of the case.” In re Marriage of Schmitt, 321 Ill. App. 3d 360, 371 (2001)
The hard part is proving the second prong of that test, that “the plaintiff will suffer irreparable harm without the protection of the injunction.” When asking an Illinois court to freeze assets, you must also reasonably inform the court that those assets will go away and never come back in order to establish “irreparable harm.”
“[I]rreparable harm occurs only where the remedy at law is inadequate; that is, where monetary damages cannot adequately compensate the injury, or the injury cannot be measured by pecuniary standards.” Best Coin-Op, Inc. v. Old Willow Falls Condominium Ass’n, 120 Ill. App. 3d 830, 834 (1983)
Assets are money and all money is fungible. So, if $ 10,000 of marital assets disappears due to the actions of one particular spouse, that same spouse can just be ordered to replenish the $10,000 at a later date.
So, when Illinois courts consider freezing an assets, they consider how easily it would be for a party to replenish that asset at a later date in order to satisfy the requirement of “irreparable harm”
Even when a court orders that some asset be frozen, it usually does so under a temporary restraining order…which can only last 10 days without a full hearing.
Irreparable harm is more easily proven by showing that the harm is not a one-time thing but rather an ongoing situation. “To demonstrate irreparable injury, the moving party need not show an injury that is beyond repair or compensation in damages, but rather need show only transgressions of a continuing nature.” Bollweg v. Richard Marker Associates, Inc., 353 Ill. App. 3d 560, 577 (Ill. App. Ct. 2004)
So, if the spouse was constantly gambling or smoking the family’s funds. That would be sufficient grounds for an order restraining a party from touching, spending or doing anything with an asset like a bank account can then be shared with that bank or institution. The bank or institution upon receipt of said order will have policies that further enforce the restraint of those assets until further order of court.
Only Marital Assets Can Be Frozen
The perfect defense to a petition to freeze assets or restrain those assets in some way is to prove that the assets are not marital and thus not subject to division in the divorce.
Without a claim to those assets in whole or in part, the party requesting the freeze has no standing and their petition should, therefore, be denied.
Dissipation of Assets
An alternative to freezing assets is to let the other party spend those assets and then claim a dissipation of those assets.
Dissipation of assets is the “use of marital property for the sole benefit of one of the spouses for a purpose unrelated to the marriage at a time that the marriage is undergoing an irretrievable breakdown.” Marriage of O’Neill, 138 Ill.2d 487 (1990)
By the time a divorce is already filed, there is no question that the marriage is undergoing an irretrievable breakdown so the only question is whether the marital property was used for the sole benefit of one of the spouses.
Strangely, under Illinois law, the burden of proof is upon the alleged dissipator to prove that he or she did not dissipate those assets.
The dissipation need not be something that just exclusively benefited the alleged dissipator. Dissipation can be a spouse wasting an asset (like on a stupid investment) or failing to maintain an asset properly (like a physical property).
Upon a finding of dissipation, an Illinois trial court can then calculate the dissipated funds when determining a final equitable distribution of assets between the two parties. This usually means that if they find that one party wasted $ 10,000, they will order the other party half of that wasted $ 10,000 (or $ 5,000).
For further example. If there was a $ 100,000 estate and $ 10,000 of dissipation, an Illinois court would likely order the dissipator to receive $ 45,000 of the marital estate and the other spouse to receive $ 55,000 of the marital estate.
If you’re worried about freezing assets in your Chicago, Illinois divorce, contact our Chicago, Illinois family law firm for a free consultation with an experienced divorce lawyer.