“I’m judgment proof so I will ignore the debt collection lawsuit”
You have been sued by a debt buyer (debt collector) such as Asset Acceptance, Cavalry Portfolio, LVNV, Portfolio, Unifund, etc and you are thinking about ignoring the lawsuit because someone told you that you are “judgment proof”.
Is this smart or not so smart?
Let’s take a look at this together….
What does “judgment proof” mean?
The idea is that if a judgment can’t hurt you or impact you in any way, then it doesn’t matter. So you are “judgment proof”.
Unfortunately, this is only true in a very small number of cases but this term gets tossed around by anyone with an opinion on the internet to mean that if you are struggling financially, you are judgment proof.
So let’s go through some questions we frequently hear.
“If I ignore the lawsuit, will I have a judgment against me?”
It’s called a default judgment and it means you lost the case because you did not respond to the lawsuit.
“What are the consequences of a judgment?”
A judgment will result in:
- Judgment will show up on your credit report
- Bank accounts can be wiped out (garnished)
- 25% of your wages can be garnished every paycheck
- The judgment makes interest every year, sometimes 12% or even higher than this
- Property (including your home) can be seized and sold at what is known as a “sheriff’s sale”
So you have to ask yourself some questions:
- “Do I ever plan on needing credit again to buy something, rent an apartment or house, take a job that requires checking my credit report to get a job or promotion?”
- “Do I have any bank accounts of any type anywhere that I would not want to be garnished?”
- “Do I make any money — wages — that could be garnished?”
- “Do I mind the judgment doubling every six years (or ever quicker) due to the interest?”
- “Do I have any property that could be seized and sold to help pay off the judgment?”
Normally social security and pension money cannot be garnished but if you have anything else, it could be taken.
So the only folks that really are “judgment proof” are ones who are only receiving social security and own no assets.
And we are not just talking about now — we are also talking about 5 years from now. Or 15 years from now.
You get back on your feet. You buy or inherit property.
You recover financially and then a $5,000 judgment is now $15,000 and you are having to deal with something from a decade ago. We get these calls quite a bit and people always say “I wish I had not ignored the lawsuit. What can we do now?”
We can help them but its expensive to fix a problem that has been festering for many years.
“What are my options if I don’t want to ignore the lawsuit?”
You must take action — here are the five options when you are sued:
- FILE BANKRUPTCY — this is a last resort but you should investigate this option, especially if you have very little in the way of assets.
- FIGHT THE LAWSUIT ON YOUR OWN (NO LAWYER) — in small claims or district court this can be a very good option.
- SETTLE THE LAWSUIT ON YOUR OWN WITHOUT A LAWYER — you may be able to pay a lump sum or monthly payments to settle the case.
- HIRE A LAWYER TO FIGHT THE LAWSUIT — this will cost you money but it should give you the best chance of success
- HIRE A LAWYER TO SETTLE THE LAWSUIT — you need to compare this option with settling on your own — our clients end up paying us less than they would to settle it and/or they get more benefits out of the settlement.
“What should I do right now?”
Give us a call at 205-879-2447. Let us help you think through these five options. It may be that you are judgment proof.
It may be you need to file bankruptcy (if so we’ll refer you to a bankruptcy lawyer).
Or perhaps you should handle this on your own — if so, we’ll share with you some resources to help you.
Or you may be someone that it makes sense to hire us to settle or fight for you.
So give us a call at 205-879-2447 or click the button below and we can help you.