Judgment-Proof

Judgment-proof summary: 

• If you don’t have enough money or assets to be worth it for a creditor to collect, or if your income and assets are protected by law, you might be judgment-proof.

• Some types of income and government benefits are protected from creditors’ court judgments. 

• State laws can give you extra protections and exemptions for personal bank accounts and property in case of court judgments. 

Judgment-Proof Definition and Meaning

Being judgment-proof means that you don’t have enough available income, cash, or other assets to pay a court judgment against you, such as a judgment from a creditor’s lawsuit. Being judgment-proof gives you some protection from creditors. Even if someone sues you, wins a lawsuit against you, and is awarded a judgment in court against you, you wouldn’t have to pay. If you’re judgment-proof, you can also stop creditors from trying to garnish your wages or take money from your bank account. 

Being judgment-proof is not a “get out of jail free” card for debt relief. But if you don’t have the ability to pay a court judgment, or if the money or assets that you have are protected, you could be judgment-proof. 

Being judgment-proof isn’t always good news or a reason to celebrate. But it can give you one extra layer of protection against credit card company lawsuits or other potential problems with unpaid debt.  

Judgment-Proof: Key Features 

The idea of being judgment-proof is based on the fact that creditors can't collect money or assets that don’t exist. Even if you lose a lawsuit to a creditor, they can’t take everything you own or every last dollar. Federal and state laws put limits on what creditors can take, and how much. Some types of income and assets are exempt from court judgments. 

When you’re judgment-proof, it’s generally not worth it for the creditor to spend time and money trying to collect on your debt. It can also have a few different limits and meanings based on your local state laws. 

But here are a few key features that might make you judgment-proof: 

• You have very low income

• You have no cash savings 

• You don’t own real estate 

• You don’t have other valuable personal property 

• You get most or all of your income from a protected source such as Social Security or other government benefits programs

• You are disabled, unable to work, and receiving government disability benefits 

Judgment-proof isn’t a permanent condition by definition. If your financial situation changes, you might no longer be judgment-proof.

Judgment-Proof: Real-Life Examples  

Some federal benefits and types of income can be automatically protected from court judgments and garnishment if you receive the income via direct deposit. A few real-life examples of judgment-proof protected income include: 

• Social Security 

• Supplemental Security Income (SSI) 

• Veterans’ benefits 

• Military service member pay 

• Military annuities or survivor benefits

• Federal student aid 

• FEMA financial assistance

• Federal civil service retirement benefits 

Even if you receive income every month, even if you’re retired, you might still be judgment-proof if your income is one of these protected types. And even if a creditor wins a lawsuit against you and gets a court order to garnish your bank account, banks are required to leave two months’ worth of protected benefits in your account. 

It’s easier to prove where the money came from and how much of it equals two months’ worth if you receive it by direct deposit. But the money is still protected even if you receive a paper check. In that case, you may have to prove where the money came from by showing statements or other documentation.