Seventh Circuit: Checking Account is Personal Property

Photo Credit: Creative Commons Attribution 3.0

Photo Credit: Creative Commons Attribution 3.0

In a short opinion, the Seventh Circuit found the issue clear that a bank account indeed constitutes personal property under Illinois law.

In Porayko, the Seventh Circuit considered the issue of whether Illinois law treats a citation served on a judgment debtor as a lien on the value of the debtor’s bank account.

The issue concerned the proper interpretation of 735 ILCS 5/2-1402(m), which provides that a citation to discover assets creates a lien on all “nonexempt personal property…”

The citation lien holder argued that the value of a checking account was “personal property” within the depositor’s control, to which his lien properly attached.

The trustee, relying on language from the U.S. Supreme Court in Citizens Bank of Maryland v. Strumpf, 516 U.S. 16, 21 (1995), argued that the bank account was nothing more or less than a “promise to pay” and therefore the account value could not be personal property.

The Bankruptcy Court agreed with the citation lien holder, and the trustee asked the Seventh Circuit to reverse.

Noting that the trustee had not identified any decision in Illinois (or any other state) concluding that a bank account was not personal property (for the purpose of a similar statute), the Seventh Circuit concluded that it indeed was, and made the following observations:

Strumpf did not present the question whether a bank account is “personal property” for the purpose of §5/2-1402(m) or a similar state law. It held that a bank does not violate §362 by deferring payment so that it can offset an account’s value against a debt owed to it. The Court’s point is that a bank is not a warehouse, as if its vault (like Gringotts Bank) held stacks of specie labeled for each depositor. A bank’s delay in complying with a payment instruction does not take any property away from the depositor and so does not violate the automatic stay. This does not speak to the question whether an account holder’s rights are “personal property.” Certainly the rights are not real property! A bank account may be an intangible interest, but intangible rights (for example, patents or copyrights) are still personal property. The Illinois statute asks what property rights a judgment debtor “controls”; it is sensible to say that a checking account’s holder controls the right to designate who receives the funds on deposit, which makes its value a form of “personal property” under Illinois law.

[ . . . ]

Indeed, if the Trustee were right, then serving a citation on a bank would be as useless as serving one on a debtor. If the value of an account is not “personal property” from the debtor’s perspective, it is not “personal property” from a bank’s either. The bank sees an account as a debt to its client—as a liability, not an asset. The bank’s assets lie in what it has done with the money (for example, lent it to a business or homeowner); the  borrower’s note  promising to repay is the bank’s property. Bank accounts are an important form of personal wealth; we cannot believe that Illinois has placed them beyond the reach of judgment creditors, and done so in such an obscure way.

While I am sympathetic to the trustee’s efforts, as an Illinois account holder, I feel a little better about my money in the bank.


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