Two years ago, Illinois instituted the Local Debt Recovery Program (“Program”), which allows local governments to intercept a debtor’s state income tax returns, state payroll, lottery winnings, contract payments and most other state payments, which the local government can then apply toward the unpaid debt. We previously reported on the Village of Lake in the Hills’ success with the Program, having recovered over $16,000 in its first few months of operation. Yet still, only a small percent of Illinois’ local governments have implemented the Program.

Through this Program, local governments may recover delinquent debts owed to them for obligations such as unpaid parking tickets, property code violations, water and sewer bills, and other service fees. All units of local governments may participate in the program, including municipalities, townships, school districts, state colleges and universities, and conservation districts. Perhaps the best part about this program is that participation is free—all costs of the state’s administration are charged to the debtor.

In order to participate, the local government unit must enter into an Intergovernmental Agreement with the State Comptroller’s office. Once an Intergovernmental Agreement is established, the local government will need to keep track of the following information for each debt it wishes to recover and submit the same to the Comptroller:  (1) the name and other identifying information of the debtor; (2) the amount claimed due; (3) the reason for the debt; (4) the time period to which the claim is attributable (the debt must be no more than seven years old); (5) the name of the local entity;  (6) a description of the notification to the debtor that the debt existed; (7) a statement as to the outcome of any hearings held to establish the debt; and (8) the date of final determination of the debt.

Once the above eight pieces of information are submitted to the State Comptroller, the  Comptroller will then withhold 25 percent of an individual’s state wages or contract payments and 100 percent of certain other monies such as state income tax returns and lottery winnings due to an individual. Then, once the State withholds the money, the debtor is given 60 days to contest the deduction. If the deduction is not contested, then the money withheld is forwarded to the local government. While the State may charge the debtor up to $15 per transaction, the local government is not charged a dime. Once the debt is satisfied, the local government would have a duty to inform the Comptroller of that fact within 30 days.

Any local governments not currently using the Local Debt Recovery Program should take the steps to enroll and take advantage of this free collection tool.


Jennifer J. Gibson

Author: Jennifer J. Gibson