What Is Judgment-Proof?

Judgment-Proof Explained in Less Than 4 Minutes

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“Judgment-proof” is a legal term to describe an individual with very little income, cash reserves, or other assets that a creditor could seize for a debt repayment. If your income is protected from garnishment and you have minimal other assets, you may be considered judgment-proof.

However, being judgment-proof won’t last forever, and the exact length of time depends on your state’s laws. Here’s what you need to know about being considered judgment-proof.

Definition and Example of Being Judgment-Proof

If you don’t have enough income or assets to satisfy a court judgment that’s been brought against you, you may be considered judgment-proof. Some states shield certain assets from being repossessed in a court judgment, such as homes. Certain income is judgment-proof, too, like child support.

For example, let’s say you default on a credit card and your lender sells your debt to a collection agency. The collection agency sues you for the money you owe and receives a judgment against you. However, you don’t earn much more than minimum wage and don’t have any assets for your creditor to seize. You do receive monthly child support payments, but since this income is protected, you’re considered judgment-proof.

Being considered judgment-proof doesn’t erase the debt you owe. You’ll continue to owe the money, even though you’re unable to pay it right now. If your financial situation improves, your creditor can try again to collect on the money you owe them.

How Being Judgment-Proof Works

If you default on consumer debt such as a credit card or personal loan, your creditor can sue you for the money you owe. Once they take you to court and receive a judgment against you, they can take steps to garnish your wages. However, if you’re judgment-proof, your creditor won’t be able to collect on your income or assets.

Some people are deemed judgment-proof because they earn income that is legally protected from garnishment, so a creditor can’t collect it based on a judgment. Types of income that can’t be garnished include:

Others are unemployed or earn less than the wage garnishment limits imposed by federal and state laws. Federal law limits creditors to taking the lesser of either 25% of your disposable earnings or 30 times the federal minimum wage ($7.25 an hour).

Some states set their judgement-proof limits even lower than the federal limits. For instance, in Illinois, a creditor can only garnish up to 15% of your gross wages for the week, and can’t reduce your take-home pay below $495.

Your creditors will likely continue to contact you and try to collect on what you owe. In this situation, you may want to send your creditor a judgment-proof letter, which tells your creditors to stop contacting you. In some cases, it may also prevent them from taking you to court.

Before sending a judgment-proof letter, it’s a good idea to speak to an attorney. Informing your creditor that you’re unable to repay the money you owe can negatively impact your credit and make it difficult to rent an apartment or take out a loan in the future.

Key Takeaways

  • If you’re considered judgment-proof, it means you don’t have enough income or assets for your creditor to seize for debt repayment.
  • Some people are judgment-proof because they’re unemployed or their income is below federal or state guidelines for garnishment.
  • Others may be judgment-proof because they receive legally protected income such as Social Security, VA benefits, unemployment benefits, child support, and federal retirement benefits.
  • If your creditor continues to contact you, you can send them a letter informing them that your income and assets are judgment-proof.
  • Judgment-proof status doesn’t last forever, so if your financial situation improves, your creditor can continue trying to collect the money you owe them.

Article Sources

  1. Texas Legal Services Center. “What Does It Mean To Be ‘Judgment Proof’?

  2. Los Angeles County Bar Association. “Judgment Proof – Information and Sample Letter.”

  3. U.S. Department of Labor. “Fact Sheet #30: The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title III (CCPA),” see “Limitations on the Amount of Earnings That May Be Garnished (General).”

  4. Illinois Legal Aid Online. “Wage Garnishment Basics.”