The Facts

• The term "judgment-proof" is used to refer to an individual who, due to a lack of income or assets, is unlikely to be sued by a creditor for a debt.
  
  

Significance

• A creditor will often sue for a debt in the hopes of being awarded a wage garnishment, bank levy or property lien against an individual. If the individual's income is exempt from garnishment or levy and he owns no property on which a lien may be placed, paying court costs and attorney fees for a lawsuit is not in the creditor's best interests.
  
  

Time Frame

• If you know you are judgment-proof, yet you receive a court summons, you have a limited amount of time in which to file a response notifying the plaintiff and the court of your current financial status. This often results in the creditor dropping the lawsuit. The amount of time you have to respond to a summons varies by state.
  
  

Considerations

• Forms of income that are exempt from garnishment and thus help make an individual judgment-proof are Social Security, government assistance, state retirement pension, unemployment payments or low-paying employment that does not leave enough disposable income to legally garnish.
  
  

Misconceptions

• Just because you are considered judgment-proof does not mean that a creditor cannot sue you. It simply means that the odds of a lawsuit are greatly reduced.