What Does “Judgement Proof” Mean?

By James Roswold | October 22, 2021

The term “judgment proof” is not technically a legal term, but it is commonly used in the legal industry to describe a debtor who lacks the assets for a creditor to seize. In other words, if you are “judgment proof,” it means that you do not have anything for a creditor to collect after a judge has issued a judgment against you.   

 

How Creditors Collect Debts

 

If you owe money to a creditor, the first step the creditor needs to take is to file a lawsuit against you for the unpaid amount. If the creditor is successful, the judge will grant the creditor a “judgment.” Once obtained, a judgment allows the creditor to use more vigorous means to recover the debt from you. 

 

For instance, a creditor can use the judgment to require your employer to garnish your wages and send that portion of your paycheck to the creditor. Creditors are allowed to garnish up to 25% of your paycheck until you have paid the judgment in full. The judgment can also be issued to your banking institution to levy your bank account. This action forces your banking institution to send the creditor any money that is in your accounts, up to the full amount of the debt.

 

A creditor that has obtained a judgment against you can also put a lien on your house. Although this measure may not immediately put money in the creditor’s pocket, if you ever decide to sell your home, you will be forced to pay the lien when you sell the property. You should also be aware that you may not be notified that a lien has been placed on your property, and there are some circumstances in which a creditor can use a lien to foreclose on your house. 

 

When an individual is “judgment proof,” they are in a situation in which none of the above actions can be implemented against them. 

 

In order for someone to be completely judgment proof, their income must also be protected from creditors. The government has identified specific types of income that are protected from the collection of creditors. The following types of income are judgment proof:

  • Unemployment benefits
  • Social security benefits
  • Public assistance benefits
  • Child support

 

Creditors cannot collect your income with a judgment if it falls under the above categories exclusively. Alternatively, if you are paid all of your wages under the table (i.e. in cash) there is no way for a creditor to garnish your wages.  

 

What if my income is protected but I own a home?

 

The creditor may not be able to forcibly take your income, but, unfortunately, a judgment still provides a creditor with the authority to obtain a lien on your home. 

 

So, to reiterate the bottom line here: you are “judgment proof” if all of your income falls under the government protected categories and you do not have any assets, such as property or bank accounts, that a creditor could levy or put a lien against. A creditor can still get a judgment against you, but they will not be able to collect anything from you to pay off the debt. 

 

What does this mean in terms of bankruptcy?

 

Since creditors cannot collect from individuals who are judgment proof, most of these people will elect not to file bankruptcy. Being judgment proof, however, will not stop creditors from harassing you. They can continue to call you and send you threatening letters demanding payment on the judgment. 

 

Even though they are judgment proof, there are individuals with debt who will still choose to file bankruptcy. Filing bankruptcy not only stops the harassment from creditors, but it also pays any outstanding judgments and debts that are causing bad credit, creating a fresh financial beginning.  

  Are You Considering Filing For Bankruptcy? If you feel bankruptcy is the best option for your financial situation you need to speak with an experienced bankruptcy lawyer as soon as possible. Please contact us online or call our office directly at 888.348.2616 to schedule your free consultation.

Are You Considering Filing For Bankruptcy?

If you feel bankruptcy is the best option for your financial situation you need to speak with an experienced bankruptcy lawyer as soon as possible. Please contact us online or call our office directly at 888.348.2616 to schedule your free consultation.