Being Judgment-Proof

All, how nice the sound of being judgment proof. It is the ultimate “nah nah nah nah nah” on your creditor. You do nothing at all and they are helpless to retaliate. You don’t need a bankruptcy lawyer, you don’t need debt settlement. You just sit back and laugh.

But is it really so easy?

Being Judgment Proof means that even if someone sued you, won the law suit and got a judgment against you, they would have nothing to take from you. Thus, the judgment would be totally meaningless.

This situation applies to people with no income (other than perhaps social security), no assets, and no plans to have income or assets in the future.

Oh, there is one more thing; you probably should not have a phone. Even if the creditor can not take your money, freeze your bank account or do anything else, one thing the creditor can do is harass. Creditors will call you day and night. You will change your number, they will find it. They will call your family, your neighbors and it will not be fun.

Judgment proof people often hire me to do bankruptcy after years of creditor-silence. The creditors seem to disappear for years and then “BAM!” its calls day and night. The calls drive people into my office for chapter 7 bankruptcy. Usually, a chapter 7 bankruptcy is very inexpensive for a judgment proof person. It is certainly worth being free of creditor headaches. But the calls are not the only concern.

The Story of Sam

Recently, a gentleman named Sam who was 72 years old (and quite fit) came to my office. He was a good man, worked hard all his life and ran into some tough times later in his years. He had about $10,000 of credit card debt when he retired 8 years ago. A bankruptcy lawyer in New Jersey who probably thought it was smart advice at the time, told Sam that he was Judgment Proof, and to ignore the debt. Sam listened.

Sam enjoyed being judgment proof for 8 years and for most of the 8 years the creditors were silent. Suddenly, last year Sam’s sister passed away. Sam received a $15,000 check in his account from his sister’s estate. He didn’t even know his sister had $15,000! He was the last remaining family member so the money went to him. Sam was delighted.

He got the money and spent about $4,000. If was HUGE for him. He got a better ear piece, traveled a bit, caught up on some bills.

Suddenly, his account was frozen. His old $10,000 debt was now a judgment for $28,000!

Bankruptcy could stop the bank freeze and get the money but there was now another problem. In New York Bankruptcy Law (where Sam now lived) you can only have $2500 of cash. The rest must go to your creditors. No matter what, the most money Sam could keep would be $2500. His money was gone.

Everyone in my office loved Sam and it broke our hearts that there was nothing we could do. If Sam had only dealt with his debt 8 years ago, this never would have happened. You just don’t know what will come up. It is always better to eliminate debt when you can than to put it off to the future.