You might have heard the term “Judgment Proof” as it relates to bankruptcy, but what does it actually mean? A Debtor is considered judgment proof when the Debtor does not have any property that creditors can take from, because all the property they do have is exempt under state law. A creditor can enforce and collect on a past due debt through a judgment, but only if there are nonexempt assets that they can go after.
When a Debtor is judgment proof it means that that Debtor is safe from a court judgment for collection. The court only has the power to award a judgment to a creditor to collect property that you own and income that you earn. If a Debtor does not have any assets, there is nothing for the creditor to collect on. This essentially makes the creditor’s judgment worthless and the Debtor judgment proof.
This does not mean that to be judgment proof you cannot have anything to your name. If your assets are not worth enough, creditors will not try to collect. Creditors will do some investigating to see if it is worthwhile to collect from a Debtor and if they do not think there is a high likelihood of satisfying the debt, often times they will decide not to collect.
There are certain types of income that creditors are not allowed to collect. For example, Social Security Benefits, Unemployment benefits, Disability Benefits and some retirement income is protected from creditors attempting to collect. Creditors are also limited in the amount they can garnish out of a debtor’s paycheck.
If you have are unsure about whether you are judgment proof and think bankruptcy might be necessary, contact W M Law, 913-422-0909, office and one of our experienced attorneys will be able to help. We have three convenient locations in the Kansas City area.
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