United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
B. Gottschall United States District Judge.
J. Polivka (“Polivka”) works as a commercial real
estate agent. He operates a single-member limited liability
corporation, the Polivka Group, LLC (“the LLC”).
Polivka and the LLC defaulted on a loan guaranteed by the
Small Business Administration. In 2012, the United States
obtained a $65, 812.40 default judgment against both
defendants. (ECF No. 17.) The government moves under a
provision of the Federal Debt Collection Procedures Act of
1990 (“FDCPA”), 28 U.S.C. § 3204, for an
order requiring Polivka to make installment payments on the
judgment. See generally United States v. Badger, 818
F.3d 563, 572-73 (10th Cir. 2016) (discussing the FDCPA's
purpose and providing an overview of the statute).
FIXING INSTALLMENT PAYMENTS UNDER THE FDCPA
3204, under which the government is proceeding, authorizes a
court to order a judgment debtor to make installment payments
when the evidence shows that the judgment debtor: “(1)
is receiving or will receive substantial nonexempt disposable
earnings from self employment that are not subject to
garnishment; or (2) is diverting or concealing substantial
earnings from any source, or property received in lieu of
earnings.” 28 U.S.C. § 3204(a) (West 2017);
see also Id. § 3204(c)(1) (exempting judgment
debtor that is subject to a writ of garnishment under the
or both of those conditions are met, the court must consider
“after a hearing, the income, resources, and reasonable
requirements of the judgment debtor and the judgment
debtor's dependents, any other payments to be made in
satisfaction of judgments against the judgment debtor, and
the amount due on the judgment in favor of the United
States” when fixing the amount of an installment
payment. Id. § 3204(a); see also Davis v.
United States, 569 F. App'x 322, 325 (5th Cir. 2014)
(holding § 3204 allows district court to fix payment at
“any amount supported by the totality of his finances,
so long as substantial nonexempt disposable earnings [a]re
parties primarily disagree about how, if at all, to separate
the income and expenses of Polivka and the LLC. In April
2017, the court entered an order stating that it could not
“determine how to allocate the income and expenses
reflected in the record between Polivka and [the LLC].”
(Order 2, ECF No. 46.) The order described the record this
[N]o party has provided separate evidence of Polivka's
personal income. Nor does any party explain why the Polivka
Group, LLC's earnings and expenses should be equated to
Polivka's. Polivka asserts, without citing legal
authority, that his “sole source of income” is
the net ordinary income of the Polivka Group, LLC. ECF No. 45
¶ 8. The profit and loss statement does not reflect that
Polivka pays himself a salary, however. See ECF No.
45 -7 at 1.
Furthermore, some of the expenses listed in the Polivka
Group, LLC's profit and loss statement match expenses
Polivka claims as personal expenses. The profit and loss
statement expenses include the amount of the entire cost of
rent for the space in which Polivka works and lives, for
instance. Compare ECF No. 45-7, with ECF
No. 45-3 (letter of understanding regarding rental). The
statement also lists the cost of internet access; expenses
related to maintenance of a car, including parking and gas;
and fees for membership in the multiple listing service and
other fees for membership in professional organizations as
expenses. See Profit & Loss Stmt. 1, ECF No.
45-7. On the other hand, other costs claimed by Polivka as
personal expenses are not reflected on the profit and loss
statement, even though some, such as health insurance, are
sometime[s] born[e] by an employer. Compare ECF No.
45 ¶ 7 (listing as expenses children's school
tuition, daycare, rent, utilities, health insurance, cost of
medical services for Polivka's children, and personal
obligation to the Internal Revenue Service), and ECF
No. 45-6 at 1 (IRS notice of intent to levy addressed to
Polivka personally), with Profit & Loss Stmt. 1
(listing rent, phone, and internet access as expenses but
omitting health insurance costs).
(Id. at 2-3.) The court ordered the parties to file
supplemental memoranda clarifying their positions on which
income and expenses are attributable to the LLC and which are
attributable to Polivka. (Id. at 3.)
on the fact that Polivka and the LLC are both judgment
debtors, the government argues that treating the LLC's
income and expenses as Polivka's makes practical and
legal sense. It also suggests that piercing the corporate
veil between Polivka and the LLC is appropriate because the
two “are so intertwined that the court should consider
them the same.” (See Supplemental Mem. 1-3,
ECF No. 52.) Lastly, the government maintains that the
profits of a single-member LLC are generally taxed as the
member's gross earnings and cites a bankruptcy case to
argue that Polivka would be required to list the LLC's
gross, rather than net, income as his income. (See
Supplemental Mem. 3-4, ECF No. 52 (citing In re
Stamat, 395 B.R. 59 (Bankr. N.D.Ill. 2008),
aff'd sub nom. Neary v. Stamat, No. 08 C 6543,
2009 WL 2916834 (N.D. Ill. Sept. 2, 2009) and In re
Mosher, 417 B.R. 772, 782 (Bankr. N.D.Ill. 2009)).
disagrees. He urges the court to treat his and the LLC's
income and expenses as separate. He submits cash flow and
profit-and-loss statements for the LLC showing that he took
$7, 021.66 as his “owner's draw” from the LLC
in calendar year 2016. (Stmt. Cash Flows 1, ECF No. 54-3;
see also Id. Ex. 2 (cash flow statement showing
owner's draw of $725.04 for Jan.-Mar. 2017)). The LLC
earned $58, 525.91 in gross income during the same period,
according to the profit and loss statement in the record.
(Profit & Loss Stmt. Calendar Year 2016 at 1, ECF No.
54-5; see also Profit & Loss Stmt. Jan.-Mar.
2017 at 1, ECF No. 54-6 ($4, 836.30 in gross income)).
FDCPA's definitions section, § 3002, points the way
to resolving this dispute. As it turns out, neither party is
Polivka is Receiving Earnings ...