The worst kind of defendant to file a civil lawsuit against is one who is legitimately judgment proof. More than one attorney has advised a client not to pursue civil litigation against such a person. However, there is something to remember: being judgment proof is not necessarily a permanent situation.
Before giving up on the idea of litigation, it is a good idea to understand why the other party might be judgment proof. Perhaps his circumstances are only temporary. Perhaps the driving factor is his health but stands a good chance of recovering in the future. Looking into the details may reveal reasons to move forward with litigation anyway.
The Basics of Being Judgment Proof
So, what does it mean to be judgment proof? A person is considered judgment proof if they legitimately cannot pay a monetary judgment. As a general rule, three conditions must exist before a debtor is considered judgment proof:
- The debtor must have insufficient income to make garnishment reasonable.
- The debtor must have no tangible or intangible assets of any value.
- The debtor must have no reasonable prospects for the future.
A good example of a judgment proof debtor is a middle-aged adult working a minimum wage job and with no savings to his name. He also does not own a home, have any investments, own collectibles of any sort, or own a car with any real value.
Things could change. This individual could get a better job down the road. A better job might afford the opportunity to buy a new car. Maybe in seven or eight years, the debtor buying his first home will be a real possibility.
Creditors Have Years to Collect
One of the more interesting aspects of monetary judgments is that creditors generally have years to collect. The exact number of years depends on state law. On average, states allow 7-10 years to collect. In addition, most states allow judgment renewal prior to current expiration.
You might have a situation in which a judgment debtor truly is judgment proof at the moment the decision is rendered against him. But a lot can change in five years. In a state with a 10-year statute of limitations and unlimited renewals, there is always hope.
In such a case, the judgment creditor might want to put collection efforts on hold temporarily. Meanwhile, monitoring the debtor’s financial situation would be an order. If anything changes to the positive, a creditor can begin thinking about initiating collection efforts.
Bringing in the Professionals
Collecting from a debtor who claims to be judgment proof is rarely easy. Likewise, it can be just as difficult to collect from someone whose financial position changes years after the fact. That is why I personally feel like it is better to bring in a collection agency from day one.
Judgment Collectors is a Salt Lake City agency specializing in monetary judgments in eleven states. They are very good at assisting with monetary judgments because it is all they do. Rather than merely accepting a debtor’s claim of being judgment proof, Judgment Collectors digs around. They search property records, court records, proprietary databases, and even social media. If they find any evidence that a debtor is not judgment proof, they can use the information to their advantage.
The truth is that some judgment debtors really are judgment proof at the time their court decisions are rendered. But being judgment proof isn’t always a permanent situation. Even someone who cannot pay today might be able to pay tomorrow. So the possibility is at least worth looking at prior to filing a lawsuit.
