Judgment-Proof
What does it mean to be "Judgment-Proof"?
You are "judgment-proof" when you lose a lawsuit and it has no
adverse effect on you.
A judgment, rendered at a hearing for which you would receive
a summons, is a court's determination regarding the validity of
a debt claimed by a creditor. In certain cases, although a creditor
may go to court and obtain a judgment against you, you may not
be forced to pay on the debt if you can prove that you do not have
any property that the creditor could take to satisfy the debt.
In that case, you do not really have to worry about the judgment
unless your financial situation substantially improves.
This status is often referred to as being "judgment-proof." Generally
speaking, you may be "judgment-proof" if all your income and property
can be excluded by law from a creditor's attachment efforts.
A combination of federal and state laws exclude most forms of
public assistance from such attachment. Excluded income includes,
but is not limited to, unemployment and worker's compensation,
all forms of social security and veteran benefits, welfare benefits,
and most ERISA-backed pensions. If your assets and income are small
enough or are of a type that federal and state law fully protects
from seizure by creditors, you cannot be made or forced, even by
a court of law, to repay creditors.
What should I do if I am "judgment-proof"?
If you are unable to make minimal payments on unsecured debt,
you should write to your creditors and explain your situation.
Be sure to stress that you believe that you are "judgment-proof".
Once a creditor realizes that you may not be forced to make payment
against the debt, the creditor may elect not to pursue court procedures
against you.
There is, of course, no guarantee of this. However, bear in mind
again that even if a creditor obtains a court judgment against
you, you cannot be required to repay this debt from exempt sources
of income.
What if the creditor takes me to court?
Seek legal counsel to determine what defenses and counter claims
may be available to you. Whether or not you have obtained an attorney,
you should go to the judgment hearing and explain your situation.
If you are unable to afford an attorney, call your local bar association
or check the yellow pages for non-profit legal groups. Legal representation
can protect your rights with regard to seizure of property and
creditors' claims. An attorney can also explain to the court your
lack of ability to pay.
The court may grant you a continuance, which means no finding
has been made on the debt. At worst, the debt will be adjudicated
to be your responsibility, but so long as your income is from exempted
sources, you cannot be forced to make payments against the debt.
You should be aware that the judgment will probably appear on
your credit report and make it difficult for you to get credit.
The above information should be understood to be a general
discussion of the subject matter and DOES NOT constitute
a legal opinion about the situation. For further information
please consult a qualified attorney.
Back to Basics Of |
