FAQ: What Does It Mean to Be “Judgment Proof”?

In most cases, when a creditor sues you in court and wins, the court issues an order granting the creditor a money judgment against you.  The creditor can then garnish your wages, place a levy on your bank account, or file a lien against any real estate you own.  But what if you aren’t working, the money in your bank account is from Social Security or some other source that creditors can’t touch, and you don’t own any real estate?  Then the creditor can’t collect on its judgment, and you are considered “judgment proof”.

Therefore, “judgment proof” doesn’t mean that you can’t be sued, but rather that the judgment against you is worthless because the creditor can’t collect on it.  Generally, you are judgment proof if:

  • you don’t have a job, or you have a very low-paying job;
  • your income is derived from unemployment benefits, Social Security, veteran’s benefits, child support, federal employee and civil service retirement benefits, or other public entitlement benefits that are exempt from being seized by judgment creditors;
  • you don’t own any assets such as money in a bank account, real estate, vehicles, and other personal property that are not protected by state exemption laws;
  • and this condition is expected to exist into the future.

However, keep in mind that you may have to prove to a judgment creditor and/or a court that you are indeed judgment proof.  For example, you could face a situation where your bank account is levied (attached) even though the money in it was from Social Security.  You would have to take action to prove the source of the money was Social Security, and the money would then be returned to you.  Still, you would have a period of time when you don’t have the use of this money.

Moreover, being judgment proof may not be a permanent condition of your life.  While you may be judgment proof right now, your situation might improve if you were to start working, get a better job, or even inherit some property in the future.  So it is possible that a creditor who got a judgment against you could collect at a time when you do find yourself collectable.

With this in mind, you might want to consider filing a bankruptcy to wipe out debts and judgments against you now, even if you consider yourself judgment proof at this time.  Doing so could give you peace of mind as you begin to rebuild your financial stability.  Especially if you find yourself faced with lawsuits by your creditors, it would be beneficial to at least discuss your situation with a bankruptcy attorney.