Income, for some people, is easy to define. Some people have jobs which involve regular, monthly payments. However, there are types of earnings a court may not consider as income, at least not for the purposes of child support and alimony.
The question of whether spousal maintenance payments could be garnished from personal injury settlements is a complex question. Therefore, please do not regard any of this as legal advice. Understanding how your own finances might relate to the Illinois law on the subject would likely require a detailed, individual analysis.
Types of Personal Injury Funds
It might be helpful to first look at two common types of injury settlements. The first is a lump-sum agreement. The second is a structured settlement, which usually refers to some combination of lump-sum payments and regular, annuity-based distributions.
Income Status of Settlements and Awards
In decisions such as Villanueva v. O’Gara, Illinois courts have viewed large portions of personal injury payments as an effort to make an injured person whole again, as opposed to income which increases an injured person’s resources. Additionally, the IRS does not typically consider these payments to be taxable income — an important point since the Illinois Marriage and Dissolution of Marriage Act defines income in pre-tax gross and post-tax net amounts.
Ownership of Resources
With that in mind, you might assume personal injury money would be the sole property of the injured person. In fact, courts often determine that the money is part of the marital estate during divorce, and therefore divisible. Keep in mind, Illinois is an equitable division state. Therefore, the injured spouse could receive a much larger percentage of the resources than the non-injured spouse, as was the case in In Re Marriage of Murphy in 1994.
Alimony Garnishment From Annuities
This brings the discussion back to the question directly at hand: Can alimony be garnished from a personal injury settlement? Assuming this refers to a regular payment derived from an annuity, you might assume it could be withheld under the definitions of income in the Income Withholding for Support Act and the Illinois Marriage and Dissolution of Marriage Act. However, the Structured Settlement Protection Act could also have an effect on this issue, as it contains terms that could protect the payees of annuities from non-court-approved transfers of their payment rights. There are also various exemptions on annuities, personal injury settlements and other types of funds that could be applicable in certain cases of debt collection. Furthermore, case law decisions determining the status of personal injury awards as non-income in the context of support payments could also apply.
Again, you would probably want to have a detailed analysis performed before you either pursue or surrender funds from a personal injury settlement. Please call me at (312) 621-5234 to schedule an appointment.
