Are you Judgment-Proof (Part 2)?

Debt CollectionIf the debtor has more motor vehicles than drivers in the household, then the vehicles can be seized.  If they have collectibles with value, such as a stamp collection, coin collection, paintings, then that property may also be nonexempt.

There is a term that is often used when discussing collection of judgments.  The term is “judgment-proof.”  Judgment-proof means that the debtor has no property that can be seized by creditors.  The creditors literally have no recourse against the debtor, even though they have a court order entitling them to payment.  Whether this is the case largely depends on where the debtor lives.  You may recall that each state has its own set of exemptions.  Being judgment-proof in one state may be very different than being judgment-proof in another state.

It is possible to lose the status of being judgment-proof.  Acquiring new sources of income or assets may cause a person to become susceptible to debt collection.  Keep in mind that a judgment can literally follow a person around forever.  At some point in their life, the debtor may acquire assets that can be seized by creditors.

In reality, very few people are truly judgment-proof.  In Texas, a person who is judgment-proof usually fits this description.  They are elderly, retired, and living on Social Security.  Funds paid by the Social Security Administration are exempt.  This means that even after the Social Security benefits are deposited into a bank account the money cannot be garnished.  The person has very few assets.  They are no longer working, and unlikely to begin working in the future.

A judgment also affects a person’s credit score and their ability to borrow money in the future.  Even if a person is truly judgment-proof then they may want to obtain release from the judgment because of how it affects their ability to borrow money later on.  Having a poor credit score can be very expensive.  It may be best to pay the judgment off if possible, or file bankruptcy.