A creditor can still obtain a money judgment against a judgment proof individual, but it will be unable to collect on the judgment. A person qualifies as judgment proof if he or she does not own any assets a creditor could seize to secure payment on a money judgment. For example, an individual who does not own real estate or have a bank account would be judgment proof. An individual who works a very low-paying job would not qualify for wage garnishment.
Additionally, recipients of certain income sources are exempt from money judgments. You are usually judgment proof when all of your income is exempt, you don't have any cash in the bank, you don't have any equity in real estate, and all your assets are exempt. Federal law limits how much of your wages and income a creditor can garnish. Creditors also can't take any income that you earn from the following sources regardless of the amount:.
If you have money in cash or in a bank account that is from nonexempt sources see list above of exemptions , a creditor that sues you may ask the court to freeze that money so that they can collect it. If you don't have any nonexempt cash or money in the bank, there is nothing for a creditor to freeze and seize. If you don't have any equity in real estate, you may be judgment proof. If do you do have equity in real estate like a home, creditors are allowed to place a lien on your real estate in order to ensure that they are paid.
If they attach a lien to your property, you will have to pay it off before you can sell or refinance that property. If you do not have any real estate equity, there is nothing for a creditor to attach a lien to. Each state and the federal government has a list of commonly owned items, or assets, that can be exempted from collection up to a certain dollar amount.
If your assets are worth less than these amounts, the creditor will not be able to seize them if they win a judgment against you in court. Upsolve Community Member Does a judgement by a court for credit mean I was sued? Hiya, if I have a judgement against me for a repossessed car from and am If all of the above apply, then you are probably judgment proof. However, they may continue to call and send letters attempting to collect.
Certain types of income, such as Social Security benefits, unemployment benefits, some types of retirement income, and disability benefits, are safe from collection lawsuits under any circumstances. Debt collection is subject to a statute of limitations. So, when they near the end of the statute of limitations on your debt, they may choose to sue just to get a judgment and keep the collection option open.
Before you decide to ignore collection calls or a collection lawsuit, consider that a judgment for collection is valid for 10 years. Creditors also can seek renewal of the judgment, meaning you may be on the hook for a long time. If you come into money or start earning a paycheck with a judgment against you, the creditor can seize the cash or garnish your wages. Perhaps your best option is to seek alternative debt relief, such as debt consolidation or debt settlement.
In any case, you should never ignore a lawsuit without consulting with an attorney. Perhaps bankruptcy is the best course of action for you — it will stop a collection lawsuit and protect your important assets while permanently wiping out your unsecured debts.
Even when your debt seems insurmountable and lawsuits are pending, you have options. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content.
Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. 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. A debtor who is broke and unemployed can be considered judgment proof, as can a debtor who only has certain legally protected types of assets or income.
Judgments can be valid for many years, and creditors can continue to try to collect what the judgment allows long after they win a lawsuit against a delinquent borrower.
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