Judgment-Proof

Judgment proof summary

• Judgment proof is a financial situation where a creditor may be able to win in court but won't be able to collect anything from you. 

• Judgment proof is not a legal term. Creditors can still decide to sue you and attempt to collect.

• If your financial situation improves, you may no longer be judgment-proof. 

Judgment-proof definition and meaning

Judgment-proof is a financial state where you have nothing a creditor can claim if it wins against you in court. If you're judgment-proof, all your income and assets are legally exempt from being taken from you. You might also describe it as having nothing to lose financially. However, judgment-proof may not be a permanent situation.

Key concept:

A state in which none of your income and nothing you own could be taken by creditors, even if they sue you and win. They may win a judgment against you, but they can't collect it.

More about judgment-proof

If you're judgment-proof, these four things might be true:

• You don't have a job that pays a livable wage or a business that makes money.

• You receive some form of government benefits.

• Your assets have little value.

• Any money you have comes from exempt sources and is protected from garnishment.

Finally, to be judgment proof, this situation must be long-term. A short stint of unemployment or a temporary disability won't generally make you judgment-proof. But if you rent, don't own a car, receive disability benefits, and have no savings, you might be judgment-proof. 

If your situation were to change—for example, you win a lawsuit, get a good job, buy a lucky lottery ticket, or inherit a windfall—creditors with judgments against you may come calling.

Judgment-proof: A comprehensive breakdown

The term judgment-proof really means collection proof. Debt collectors could sue you and get a judgment against you, but they can't legally collect if all your income and assets are protected by law from being taken. 

If a creditor or debt collector is pursuing you for a debt you can't afford, you may be able to stop them by providing proof of your financial situation. There's little reason for them to bother taking you to court if they can't collect anyway. 

Protected income includes:

• Social Security 

• Supplemental Security Income 

• Public assistance 

• Unemployment 

• Veteran's benefits 

• Child support 

• Federal employee and civil service retirement benefits

Each state and the federal government also have a list of personal property that creditors can’t take, up to a certain dollar amount.

If you're permanently judgment-proof, you might not have to worry much about creditors and debt collectors. If you think your money situation might get better, think about paying off your debt or filing for bankruptcy to protect your future income from debt judgments.