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Does anyone know what it means to be declared Judgement Proof VS going bankrupt? A friend of mine was told he could do either one but it's confusing because we don't really understand the difference, especially when it comes to long term consequences for the action.
BK ch 7 is easy. It stays on your records for years. What does the Judgement Proof thing do?
I have never heard that term as a legal action; I've heard that term as something a person is by virtue of having nothing.
As in -- Bert, the homeless guy who lives out of his stolen shopping cart, is judgement proof because you can sue him and win seven times to Sunday, but he has no assets or income for you to get anything out of. So why bother?
Judgement proof means you don't own anything of any value and don't make enough money to have your wages garnisheed. I also have never heard of anyone being "declared" judgement proof; I have taken for granted that you still go through the process of having the judgement brought against you but that there was no recourse for the debtor to actually collect.
I would probably consider whether you have any reasonable expectation of having your situation change for the better. If you have a reasonable expectation of having your situation improve in the future I'd probably go for the bankruptcy in order to clean everything up for good so when your situation improves you will be able to get on with your life. If you don't expect things to ever improve you might as well take the judgements against you as you won't ever have to worry about them.
Does anyone know what it means to be declared Judgement Proof VS going bankrupt? A friend of mine was told he could do either one but it's confusing because we don't really understand the difference, especially when it comes to long term consequences for the action.
BK ch 7 is easy. It stays on your records for years. What does the Judgement Proof thing do?
I've never heard of a declaration that a debtor is "Judgment Proof." However, I have, on occasion, advised creditors that my client is "judgment proof." IOW, "Don't bother trying to collect any money from my client because he doesn't have any assets that a creditor can attach." For example, protected assets such as a homestead (I think in Nevada this exemption is limited to a certain amount) social security check, retirement funds (401K, IRAs, etc.) cannot be attached by creditors. The creditor can still obtain a judgment against the debtor, but has no way to execute it. In MD, judgments have to be recorded and periodically renewed to remain enforceable. For example, the debtor may later obtain employment that allows for wage garnishment, or perhaps the debtor receives an inheritance, etc. Unlike in bankruptcy, the debt is not wiped out, unless the creditor fails to obtain a judgment within the statute of limitations or fails to record and renew the judgment as required.
Thanks everyone. In the long term, BK would still be the way to go for him, I guess. Sounds like the JP thing just says you have nothing worth taking. If you get to the point where you have something, the whole thing would just start over again with the debt collectors. Nothing would be wiped out.
In it's simplest terms, being judgement proof means that whatever assets and income you have are exempted by law from seizure and/or lien for a civil judgment.
Some assets are judgement proof, i.e. our old friend OJ Simpson. He was sued for everything he owned, but his retirement from the NFL is judgment proof, meaning they can take everything he has, but he will continue to collect his retirement until he dies. No one can touch that..!!
That's one example, there are other untouchable assets. The example of the homeless bum is another situation you would be JP...!!
The younger you are, the more likely the "judgment proof" strategy won't work. Reason being, the majority of states allow for wage garnishment, and most people need a job. It's very unlikely you can abandon debt long term, without a creditor getting a judgment and seeking a wage garnishment. You will also have to live in the world of cash and check cashing stores. Because any money lying around in a bank, is fair game to be levied. Want to get a mortgage? Those outstanding debts will have to be paid first. Same holds true for any job requiring a security clearance.
For a young person, "judgment proofing" is more trouble than it's worth. Unless you want to live an underground lifestyle, off the consumer and financial grid, for the rest of your life.
On the other hand, "judgment proof" status for older retirees is a viable alternative to bankruptcy. Mainly because virtually every type of retirement income is exempt from garnishment by federal law. Also, many don't need mortgages or other credit in the future. So owing money has little consequence for them.
I know of some folks that have strategically defaulted on credit cards prior to retirement. Because they know, once retired, they are "judgment proof" and the card issuers have little recourse against them.
The younger you are, the more likely the "judgment proof" strategy won't work. Reason being, the majority of states allow for wage garnishment, and most people need a job. It's very unlikely you can abandon debt long term, without a creditor getting a judgment and seeking a wage garnishment. You will also have to live in the world of cash and check cashing stores. Because any money lying around in a bank, is fair game to be levied. Want to get a mortgage? Those outstanding debts will have to be paid first. Same holds true for any job requiring a security clearance.
For a young person, "judgment proofing" is more trouble than it's worth. Unless you want to live an underground lifestyle, off the consumer and financial grid, for the rest of your lif e.
On the other hand, "judgment proof" status for older retirees is a viable alternative to bankruptcy. Mainly because virtually every type of retirement income is exempt from garnishment by federal law. Also, many don't need mortgages or other credit in the future. So owing money has little consequence for them.
I know of some folks that have strategically defaulted on credit cards prior to retirement. Because they know, once retired, they are "judgment proof" and the card issuers have little recourse against them.
You forget owning your own business and letting the business pay for everything.
I've never borrowed money, but I've had a couple of "Side LLC's"
And (For tax reasons) my goal is to have my business pay for most of my daily expenses.
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