But I'm Judgment Proof, Aren't I?
You just got served with a lawsuit from a collection agency who's been hounding you for sometime. You're unemployed, or living on social security. Why don't they just leave you alone? You've heard the term "judgment proof", and you think it might apply to you... but what does it mean?
The meaning of the term "Judgment Proof"The term "judgment proof" is a term of art used to describe a person who's only assets are exempt assets, and who's only income is exempt income, such that they would be exempt from wage garnishment or levy. What assets are exempt? Sections 703 and 704 of the California Code of Civil Procedure set forth the exemptions which can be used to protect assets from judgment creditors in California. There are also federal exemptions which protect pensions, retirement accounts and social security. If all of your assets are exempt, and your income is protected as well, you are what we call "judgment proof".
But if I'm judgment proof, why am I being sued?Being judgment proof does not mean no one can obtain a judgment against you. Regardless of your income or assets or lack thereof, you can be sued and a judgment can be obtained against you. All being judgment proof means is that if a judgment is obtained against you, the creditor will be unable to collect. Your creditors can still hound you and demand payment. They can still call you. They can also wait and see if your situation improves and then try again. Judgments in California are good for 10 years and can be renewed for successive 10 year periods.
If I am Judgment Proof, does that mean I cannot or should not file bankruptcy?Many people who are judgment proof file bankruptcy. Just because your assets and income are exempt from collection does not mean you cannot utilize the bankruptcy system to get rid of your debt. It is a life enhancing right to be able to rid oneself of debt and obtain financial freedom. A bankruptcy discharge can provide great peace of mind and comfort and is often preferable to spending years fighting with creditors and collection agencies, sending them letter after letter only to have your claim of being judgment proof and exempt from collection fall on deaf ears. To find out of bankruptcy is a good idea for you, even if you are judgment proof, contact a reputable bankruptcy attorney in your area today.