What Does Being Judgment Proof Mean?

Sometimes a past-due debt may have accumulated beyond an amount that a person or business is able or willing to pay. A debt collector who doesn’t get payment may resort to getting a judgment against the individual or business to force them to pay. If successful, the debt collector now faces the task of actually collecting on that judgment. Being judgment proof refers to circumstances that make a creditor unable to collect on a judgment.

The Tools a Creditor May Use to Collect

Once a creditor has won a judgment against a debtor, they may now do more than merely call or send letters requesting payment. The creditor has a number of tools available to try and force payment of the debt.

The most common tools a creditor may use include:

While these tools sound effective, in the case of a person or entity that is judgment proof, they will have little or no effect.

Difficulties in Executing Collection Tools

There are limits in place to protect people from debt collections that would result in poverty for the debtor. While a debtor’s wages may be garnished, the amount is limited to 25% of earnings after mandatory deductions or the amount of wages that exceed 30 times the minimum wage. If you earn very little, the debtor will not in fact be able to collect anything from wage garnishment. Additionally, wages from Social Security benefits, public assistance benefits, unemployment, child support, and several other sources are exempt from garnishment by debt collectors.

When a creditor gets a levy issued against your bank account, those funds are seized by the creditor. However, income from any sources that are exempt from being garnished may not be seized. So again, if a debtor has very little money in their bank account or if the money is exempt from being garnished, the creditor is unable to enforce their judgment.

While a creditor can attempt to seize property including jewelry, real estate, and vehicles, there are again limits on what may be taken. A creditor may not take your wedding ring, nor seize your vehicle if it is your means of getting to work. While the creditor may place a lien on property, they may not seize your home except in very rare circumstances.

Being judgment proof means that may be able to get a judgment to collect their debt, but in reality they can’t collect. This can change as the debtors circumstances change so being judgment proof is not a permanent condition. It’s always best to consult a lawyer when facing any judgment or large debt collection claim.