What does “Judgment Proof” mean as a legal term?
Someone who is “judgment proof” does not have income, cash reserves, or other assets that a court can seize.
If an individual doesn’t pay their bills for a consumer debt like a phone bill, or they fail to pay back medical bills or personal loans, they will likely be sued and be forced to pay whatever the plaintiff claims is owed to them.
In fact, being judgment proof is often misunderstood. “Judgment proof” is not an official legal term, nor are “judgment proof” people actually immune to being sued.
What is the meaning of Judgment Proof in law?
Judgment Proof is an informal term that just refers to someone who would be difficult to obtain restitution from for various reasons. The most common reason is that, as a debtor, they simply have no money or assets which courts can legally order to be seized.
There is no official “judgment proof” status which can be noted by the courts. Being judgment proof will not automatically guarantee a victory in court.
The only true significance of someone being “judgment proof” is that it may dissuade a would-be plaintiff and any legal counsel they hire from pursuing a lawsuit. This is especially true if the attorney primarily works off of a contingency fee basis, such as car accident attorneys. After all, an experienced attorney may not find it wise to work on a case for being paid a percentage of $0.
What are the basic factors that make someone judgment proof?
Generally, someone becomes judgment proof when the following applies:
They don’t work or have a very low-paying job (or their only source of income is from government benefits)
They don’t own many, if any, assets like money in a bank account, investments, or real estate equity
Their other income sources like unemployment benefits, Social Security, other government benefits, etc., as well as their personal property, are legally exempt from being seized by the courts.
They have a limited amount of belongings (the federal government, as well as each state, lists commonly-owned items that are exempt from collection up to a specific dollar amount)
It isn’t always necessary to be financially destitute in order for someone to be judgment proof; their assets may be protected by law or may be outside of the court’s jurisdiction. The judgment may also simply be more than they can afford, thus discouraging the court from taking punitive action like wage garnishment, property liens, and bank account levies.
How does someone know if they are Judgment Proof?
Just being safe from some types of judgment collection does not mean someone is judgment proof, as they may be vulnerable to other ways of garnishing or levying their assets. Thus, to truly be judgment proof, they would need to ensure all their income sources and possessions are exempt, so that the court would have nothing to confiscate, and be certain that their financial situation is unlikely to change in the future.
For example, a judgment proof person’s income is likely exempt if it is sourced from a legally protected category like below:
Retirement or pension benefits (like IRAs, 401(k), annuities)
Social Security or Social Security Disability income
Supplemental Security Income (SSI) benefits
Veterans’ benefits
Court-ordered child support and alimony
Worker’s Compensation benefits
College savings plans (like 529 plans)
Life insurance
Vocational rehabilitation (VR) benefits
To learn more about what you should do if a judgment proof person hits you in a car accident, click here: (insert link), or book a free consult with some of California’s most experienced attorneys here at Win Nguyen Law. Don’t wait to win!
