Are You Judgment-Proof? Insights on Debtor Rights

Today’s video summary focuses on getting creditor lawsuits and being judgment-proof. Below is a summary of the video: To visit my YouTube Channel, click this link.

The Lawsuit Process

I like to say that lawsuits have two steps. The first step is the lawsuit itself. Now, assuming the creditor won the lawsuit, which typically they do, the next step is the most important part, and that is collecting on the judgment.

The collection phase of the lawsuit gives creditors several tools to enforce a judgment, including wage garnishment, liens, and freezing bank accounts. While the lawsuit process could take a while, failing to file a response speeds up the process with a default judgment. So rarely is it a smart move to ignore a lawsuit.

What Does it Mean to Be Judgment-Proof?

Debtors that are judgment-proof have minimal assets and income for creditors to target. For example, Social Security income is exempt from creditors but should never be mixed with other funds.

It’s also important to know that a judgment does not disappear because a debtor is judgment-proof. The judgment remains effective, sometimes for decades. Creditors can return and collect a judgment if the debtor’s financial situation improves. I’ve seen this endless times with clients who receive an inheritance.

Other Issues to Consider with Being Judgment Proof

Retirement Accounts such as a 401(k), IRA, or Roth IRA are protected, but to a limited extent. For example, while the funds are protected in those accounts, they lose their protection once the funds are transferred to a regular account such as a checking or savings account.

Also, homestead exemptions mean unsecured creditors can’t proceed to foreclose or take your home. Still, any lien on your house will accumulate interest, which can be costly come time to sell your house or refinance your mortgage.

So this YouTube video discusses the process of lawsuits, what it means to be judgment-proof, and strategies for protecting assets from creditors.

Additional categories are available below:

• Bankruptcy
• Your Wallet

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. Archives can be found via this link.

Please note that the site provides information about bankruptcy but is not considered legal advice.

Updated on March 23, 2025.