In Bankruptcy Information, Bankruptcy Questions, todays question

You might think that if someone is judgment proof, no one can get a judgment against them. No, that’s not correct.

What it means is that even though a creditor has a judgment or can get a judgment, the creditor has no way to collect the judgment. Usually that’s because the debtor has only exempt assets that the creditor can’t reach. For example, if the amount of equity in a debtor’s home (value minus the outstanding mortgages) is less than $30,000 ($60,000 if the debtor is married), the homestead exemption protects the equity. If the debtor owns no real estate, there’s nothing to attach a judgment lien to. If the debtor’s income is from exempt sources, such as retirement income (IRAs, 401(k)s, pensions or the like), or is Social Security or disability, the income is exempt and can’t be garnished. If all of the debtor’s personal property (cars, household furnishings, etc.) consists of exempt property, it can’t be attached.

Not all judgment proof debtors remain judgment proof. If a debtor doesn’t have equity in her home now, in several years, with the combination of paying down a mortgage and the value increasing, there might be equity. If a debtor gets a job, that income is suddenly non-exempt and can be garnished. If the debtor receives an inheritance, that is not exempt. Judgments are valid for eight years and can be renewed.

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