In the context of

contract law A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to t ...

debt collection Debt collection is the process of pursuing payments of debts owed by individuals or businesses. An organization that specializes in debt collection is known as a collection agency or debt collector. Most collection agencies operate as agents of ...

and

civil litigation Civil law is a major branch of the law.Glanville Williams. '' Learning the Law''. Eleventh Edition. Stevens. 1982. p. 2. In common law legal systems such as England and Wales and the United States, the term refers to non-criminal law. The law ...

, the term judgment proof is commonly used to refer to

defendant In court proceedings, a defendant is a person or object who is the party either accused of committing a crime in criminal prosecution or against whom some type of civil relief is being sought in a civil case. Terminology varies from one jurisd ...

s or potential defendants who are financially

insolvent In accounting, insolvency is the state of being unable to pay the debts, by a person or company ( debtor), at maturity; those in a state of insolvency are said to be ''insolvent''. There are two forms: cash-flow insolvency and balance-sheet in ...

, or whose income and assets cannot be obtained in satisfaction of a judgment. Being "judgment proof" is not a defense to a lawsuit. If sued, the defendant cannot claim being "judgment proof" as an

affirmative defense An affirmative defense to a civil lawsuit or criminal charge is a fact or set of facts other than those alleged by the plaintiff or prosecutor which, if proven by the defendant, defeats or mitigates the legal consequences of the defendant's ...

. The term "judgment proof" instead refers to the inability of the judgment holder to obtain satisfaction of the judgment. If a

plaintiff A plaintiff ( Π in legal shorthand) is the party who initiates a lawsuit (also known as an ''action'') before a court. By doing so, the plaintiff seeks a legal remedy. If this search is successful, the court will issue judgment in favor of t ...

were to secure a legal

judgment Judgement (or US spelling judgment) is also known as ''adjudication'', which means the evaluation of evidence to make a decision. Judgement is also the ability to make considered decisions. The term has at least five distinct uses. Aristotle s ...

against an insolvent defendant, the defendant's lack of funds would make the satisfaction of that judgment difficult, if not impossible, to secure.

Exempt assets

Some income and assets are exempt from being accessed to pay a judgment. If a judgment debtor has income, it may be possible to get an order of garnishment to collect a judgment from that source of income. However, if the debtor's income is low or if the debtor is already subject to garnishment, in order to prevent the impoverishment of the debtor, the debtor's income may be exempt from additional garnishment. Some states do not permit

wage garnishment Garnishment is a legal process for collecting a monetary judgment on behalf of a plaintiff from a defendant. Garnishment allows the plaintiff (the "garnishor") to take the money or property of the debtor from the person or institution that holds t ...

. If the debtor is living on income from

social security Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specifical ...

benefits, a retirement pension, or other social

welfare Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specifical ...

, garnishment may not be possible, as such income is usually protected against garnishment by creditors.

Cost of collection

The cost of collecting a judgment may also contribute to an assessment of whether a debtor is judgment-proof. If the amount that a judgment holder is able to collect from the debtor is insufficient to cover ongoing legal expenses and related costs of collection, collection efforts become uneconomical.

References

{{DEFAULTSORT:Judgment Proof Tort law

Exempt assets

Cost of collection

See also

References