Judgment Proof Or Not?

People often wonder if it makes sense to pursue a claim through the court system or whether or not to try to enforce a judgment once they win their case. If the defendant or debtor is judgment proof, why bother?

The term "judgment proof" or "collection proof" usually refer to a situation where the defendant/debtor has too little money or property to pay what they owe. In addition, there are laws that exempt certain kinds and amounts of money or property from enforcement of judgment. If the defendant or debtor has nothing or keeps his money and property under the exemption amounts, it may be very difficult or even impossible to collect.

The good news, however, is that being judgment proof is usually a temporary situation. I do not believe most people want to live that lifestyle if they do not have to. Also, things change. People may get a better job, inherit something, get married, etc. As their circumstances change then they may want to pay what they owe or other assets may become available for satisfying the judgment.

Another important thing to remember in collections is that often debts are resolved with payments over time. Such an arrangement can also put a creditor into a more favorable position than filing a lawsuit.

To protect your rights, however, it is important to take action. That means pursuing your rights within the time limits provided by law. You cannot wait forever to pursue a claim. Also, once you have a judgment you may take several actions to effectively, but passively, tie up property or at least establish your place in the line of creditors. That way, when things do turn around, you will be in a better position than if you had done nothing at all. And, judgments are valid for 10 years in California, can be renewed, and the interest is compounded on renewal.

To summarize, some defendants and debtors are difficult to collect from or are even "judgment proof". This is not necessarily a permanent condition. You can and should take steps to enforce your rights so that you will be in a position to be paid when things do turn around.