People consider filing for bankruptcy for many different reasons—possibly due to the loss of a job, unexpected health care costs, or simply some financial investment that didn’t work out as planned. However, not everyone needs to file bankruptcy. When looking into filing for bankruptcy, some may see the term “judgment-proof” being used. Below is a brief overview of the term.

Understanding Judgment-Proof

What It Means 

When someone is past due on financial debts, creditors may seek legal action against them. Specifically, the creditor may seek a judgment, which is a legal way for them to collect on these past-due debts, usually by seizing property or wages. Some debtors, however, may not have anything that can be seized; their property may be protected under federal or state law. They also might not have any income that can be seized, for example, social security income cannot generally be seized by creditors. These debtors are deemed to be judgment-proof, meaning they have nothing for a creditor to seize. The debt is still owed but there is nothing for creditors to seize.  One of the implications of being “judgment-proof” is that debtors may not need the shield of bankruptcy and thus do not need to declare bankruptcy after all. The debt may still be owed, but without assets to surrender, filing for bankruptcy may not add any more protection than that which is already in place.

Being Judgment-Proof May Not Last

Even if someone is currently judgment-proof that status may not last forever. The situation could change if new employment is found or if property is inherited. As such, it is important not to ignore creditors, who have legal recourse in place. It is best to discuss all options with a competent bankruptcy attorney. 

Filing for bankruptcy is a tough decision to make, especially if there are questions about being judgment-proof. Make sure to seek the guidance of an experienced bankruptcy attorney. Nancy V. Jacob has been a leading name in bankruptcy law for 30 years, and she proudly serves people in Cincinnati, OH. Visit her website to learn more about how she helps people find their way out of debt, and call (513) 921-1400 to arrange a consultation.