When a Judgment Proof Debtor Works to Stay That Way
In the judgment collection game, there is one type of judgment debtor every creditor fears: the judgment proof debtor. Running up against a judgment proof debtor significantly decreases the chances of ever getting paid. Things are made even worse when a judgment proof debtor works hard to stay that way.
Is it possible to still collect every penny owed from a judgment proof debtor? Certainly. Is getting paid easy? No. The big question for creditors is how to proceed. Creditors can:
- Write off the debt and walk away
- Accept whatever little they can get, when they can get it
- Wait it out to see if the debtor’s finances improve
Judgment Collectors, a Utah collection agency that specializes in judgments, says the third option can be motivation for a judgment proof debtor to make sure he stays judgment proof. After all, there’s no point in risking future assets or income if it can be avoided.
What It Means to Be Judgment Proof
If none of this makes sense to you, perhaps you don’t know what it means to be judgment proof. Normal circumstances would dictate a judgment creditor going after the debtor’s income and assets for payment. A judgment proof debtor is one that has limited income and no assets worth pursuing.
Here’s a typical example: a single individual working a minimum wage job and renting an apartment. He doesn’t own real estate or an expensive car. He has limited savings, no retirement plan, no collectibles, and no stocks.
This sort of scenario would give a judgment creditor very few options for collecting. His safest bet might be convincing the debtor to enter a voluntary payment plan. But even receiving monthly payments is a gamble.
Writing Off the Debt
Writing off the debt is one way to close the case and move on. A creditor decides to eat his financial losses while simultaneously not putting any more time or effort into debt collection. Writing off the debt may be the least palatable option. But sometimes it’s the only option that makes sense.
Accepting Whatever the Debtor Can Afford
Choosing to accept whatever the debtor can afford to pay means getting at least something. It might not be much, but at least it’s not zero. And who knows? Given enough years, the debtor might be able to pay a substantial amount.
Waiting Things Out
Most judgments are good for 7-10 years. That being the case, a judgment creditor might choose to wait things out and see if the debtor’s finances improve. He may have no assets to speak of, but he might own some worthwhile collectibles five years down the road. He might come into a significant amount of money by way of an inheritance.
Working to Stay Judgment Proof
All of this brings us back to the idea of a judgment proof debtor working to stay that way. Under the advice of an attorney, he decides to wait out the creditor. The idea is to forestall improving his financial position long enough to cause the creditor to write off the debt and walk away.
Otherwise, taking a future promotion could subject his wages to garnishment. Coming into an inheritance could mean losing it all to the creditor. Buying investment property or investing in collectibles could mean facing a rid of execution to seize and sell those assets.
There’s no way to know how often judgment proof debtors work to stay that way. But it is reasonable to assume it happens. People have been known to go to great lengths to avoid paying their debts.
