What is judgment proof?
Judgment proof is a description of a person who does not have enough assets for a creditor to seize when a court order requires debt repayment. If a bankrupt is poor and doesn’t have a job, or if they only have certain types of legally protected assets or income, the court may not be able to file an order against them. Being “collection proof,” which means you can’t be sued, doesn’t last forever. Judgments can last for a long time, and creditors can keep trying to get what the ruling allows even after they’ve won a case against a borrower who hasn’t paid.
Understanding Judgment Proof
In general, there are two ways to tell if someone is judgment-proof. The first is not having enough money coming in. This could be someone who is jobless or works a low-paying job that pays the minimum wage and makes just enough to get by.
The second reason is that they don’t have any assets that creditors can use as security, like bank accounts or real estate. Creditor companies can’t take the money you get from the government, like social security, jobless benefits, or disability payments.
Creditors cannot get the money that someone owes them if that person is “judgment proof.” This is only a short situation until the person can make money again.
Most lawyers tell people who owe money not to answer debt collectors if they think they can’t be sued. As a result, the business or organization whose job it is to collect past-due debts will get a default ruling.
When a judgment is insufficient to collect on assets or pay, state rules decide what those are.
A Case of Judgment Proof
Let’s say someone, Mike, gets sick and can’t work. He uses a credit card to pay for his year’s living costs and hospital bills. He gets better from his illness and goes back to work, but he can’t pay back the debt he racked up. When the credit card company fails to get Mike to pay, it sells his unpaid debt to a debt collection service.
The debt collectors keep calling Mike, but he doesn’t pay them anything because he’s having difficulty paying his bills, keeping his house, and buying food. The collecting agency sues Mike as a last option and wins a judgment against him for the debt that he hasn’t paid. The agency now has a court order that says Mike must pay back a certain amount.
The collection agency can’t take Mike’s wages, though, because he barely makes the minimum wage, and they can’t put a lien on his house either since he lives in a state that protects primary residences from debtors. Mike does not own anything that creditors can take away and sell to pay off his debt. He doesn’t have any cash on hand or a car. Mike is currently untouchable.
If Mike’s financial situation improves next year and he starts making a lot more money, the collection agency might be able to take a portion of his pay to start repayment. Debtors may be able to get Mike to pay their debts many years from now because decisions can last for a long time and be renewed after they end.
Conclusion
- If someone is “judgment proof,” it means they don’t have any money or an income.
- Those named “judgment proof” by the court cannot have their assets taken away by creditors.
- Creditors can’t remove your social security, disability, or jobless payments.
- People can get new judgments if the old ones run out. Each judgment is suitable for many years.
