What It Means to Be Judgment-Proof

This podcast explains what it means to be judgment-proof and how creditor lawsuits work. Here’s a brief summary of this podcast episode:

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The Lawsuit Process

A lawsuit has two phases: filing the lawsuit and collecting upon the judgment.

Specific steps must be taken between the beginning and final phases of the lawsuit, such as filing a response to the complaint or petition. The response is typically required within twenty to thirty days but varies per state. So, always make sure to research that issue. Also, remember it’s calendar days, not work days!

It’s important to note that a lawsuit should not be ignored. If so, the plaintiff gets an automatic win (default judgment). So by filing a response, at the minimum you buy time to get organized, especially if you plan on filing for bankruptcy.

After a judgment is entered, the plaintiff can proceed to step two of the lawsuit, collecting on the money judgment. Creditors have various methods, such as wage garnishment, liens on assets, or freezing bank accounts. Also, note that the amount that can be garnished varies per state. Generally, it’s between fifteen to twenty-five percent.

What Does it Mean to Be Judgment Proof?

Being judgment-proof means a creditor can only collect on the judgment if there are minimal assets or income. This means that any asset, such as a car, has minimal value, no house, and income is limited to Social Security, which is exempt.

However, that doesn’t mean the judgment disappears. The judgment remains valid, and if the debtor’s financial situation changes, a creditor can try to collect it.

Protecting Yourself From Creditors

Since Social Security income is exempt from creditors, those funds should be kept in a separate bank account to avoid having the account frozen. This is especially true if other income is deposited into the same bank account. Once funds are mixed, it becomes almost impossible to separate the protected income from the unprotected funds.

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Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. For paralegals and students buying single copies, you can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.

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Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.

Updated March 23, 2025.