Have you ever heard the term "judgment proof"? If you owe a lot of money to the bill collectors, but your income is very limited and you really don't own anything of any significant value, you just might be judgment proof.
It might be easiest to explain what it means by giving you a simple example. What if a client comes to me and tells me he owes $20,000 in credit card debts, and $10,000 in medical bills, and he wants to wipe out those bills by filing for a chapter 7 bankruptcy?
Before I can advise him whether bankruptcy is a good choice, I have to ask him quite a few questions. For example, I want to know what property he owns, what is the source of his income, who he lives with, is he getting sued, and lots of other stuff.
Let's assume I have given him a thorough interview and I have learned the following information:
He is 66 years old and is collecting social security benefits of $2000 a month. That's his only source of income.
He rents his home, he pays $800 per month and is up to date.
He is single and lives alone.
He owns a car worth about $2000 and its paid off in full.
He doesn't really own anything else of any significant value.
He is getting sued by one of the credit card companies for $4000.
He's afraid that the credit card company is going to take his social security, and he's afraid that the other credit card companies and medical providers might be suing him in the near future because he hasn't been able to pay them any money for more than 6 months.
He wants to get out of all these bills and file for Chapter 7 bankruptcy.
He's heard that if he files for a successful Chapter 7, he will be debt free in about 4 months, and these bill collectors will never be able to bother him again.
He's asking if Chapter 7 is a good decision for him.
At this point I might tell him the following: "It looks like chapter 7 will work out fine for you. You should be able to wipe out all of these bills in about 4 months, and you can get a fresh financial start for the future. But let me ask you a question before you make your decision. What if I told you that even if you did not file for bankruptcy, these bill collectors still might not be able to collect even one dollar from you?"
My client might be quite surprised at my question, but here's the truth. The creditors cannot take a person's social security money. They also can't take welfare benefits, unemployment benefits, disability benefits, and worker's compensation benefits - this type of income is protected from reach by your creditors. This is sometimes called exempt income. The creditors can't touch your exempt income. So even if my client got sued by all of his creditors, based on his present circumstances, they would never get any money from him.
Now the situation might be a little different if my client owned a house worth $100,000 free and clear with no mortgage. Then the creditors could get a lien against his house, and they could get their money when the house was sold.
But in this situation, as things stand right now, I might tell my client the following: "Guess what? I understand you are in serious financial trouble, and you want to file for bankruptcy. But as your attorney I feel that I have to advise you of other possible options, and it sounds to me that you are what we call "judgment proof". These people that are suing you, well they can't take your social security money, and you don't really have any assets of any value that they would try to take from you. So if you want to save some money and not file for bankruptcy, I think if I write to your bill collectors and let them know that you are "judgment proof", I think there's a good chance that they just might leave you alone and not bother you again. I'm sure they've got bigger fish to fry."
So at that point it's up to my client. He can certainly file for bankruptcy, but his income sure is limited, and why should he spend his money and file for bankruptcy if he doesn't really have to do it? If his circumstances change in the future, and he starts working and making $20,000 a year, well in that case a judgment creditor might try to collect by taking 10% of my client's gross paycheck, so bankruptcy might be a good decision at that point. But as long as my client has nothing except exempt income, why should he file for bankruptcy? I've told him what I need to tell him, and the final decision is up to him
Do you want to find out if you're judgment proof? Maybe we can keep the bill collectors off your back, and you don't have to file bankruptcy after all. Give us a call and I'll be happy to review your situation and your circumstances. I'm attorney Seymour Wasserstrum, and you can call me.
My website is wipeoutyourbills.com Wipe Out Your Bills and Get a Fresh Financial Start.