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What Does it Mean if a Debtor Is Collection-Proof or Judgment-Proof?

 Posted on October 31, 2022 in Debt Collection

TX debt attorneyIf you have significant debts, you may be considering the options for debt relief that may be available to you, including filing for bankruptcy. This may be an especially urgent concern if you are dealing with harassment from creditors or if you have been served with a lawsuit attempting to collect the amounts you owe. As you address these concerns, you may have come across the terms "collection-proof" or "judgment-proof," and you may be unsure if they apply to you. By understanding what these terms mean and by working with an attorney to learn more about the options for addressing your debts, you can determine the best ways to resolve your debt problems.

Collection-Proof and Judgment-Proof Defined

A person may be considered to be judgment-proof if their assets are exempt from seizure by creditors. That is, a creditor may be able to file a lawsuit against a debtor, but even if a judge rules in their favor, they may be unable to collect the amount owed. Because of this, "collection-proof" may be a more useful term. A creditor will usually be able to obtain a judgment as long as they can demonstrate that they are owed money by the debtor, but they may be prevented from collecting that judgment for a variety of reasons.

In many cases, creditors will use wage garnishment to collect debts after receiving a judgment against a debtor. However, Texas law only allows wage garnishment to be used in a few specific situations, including to collect domestic support obligations, and certain types of tax debts and student loans. While creditors will generally not be allowed to require an employer to deduct a certain amount from a person's wages and pay this amount to the creditor, they may attempt to seize the funds in a person's bank account after their wages have been deposited, so debtors may need to take steps to prevent this from happening.

A person may also be considered collection-proof if the assets they own are exempt from seizure. Texas' bankruptcy laws provide a number of potential exemptions, including the equity a person owns in their home, vehicles owned by a debtor and their family members, and other types of personal property. When creditors seek to collect debts, a person who has no non-exempt assets will generally be considered to be collection-proof.

Unfortunately, debtors who are judgment-proof may still need to deal with issues related to the collection of debts. A creditor may take steps to freeze a debtor's bank accounts, and even if the income they earn is exempt from seizure, a person may be unable to access their money until this issue is resolved. To address these issues, prevent future harassment from creditors, and avoid additional financial complications, a debtor may want to consider filing for bankruptcy, which will eliminate any debts they owe, as well as any judgments against them.

Contact Our New Braunfels Debt Relief Lawyer

The best way to find out if you are collection-proof or judgment-proof and address issues related to debts that you owe is to consult with an experienced lawyer. At the Law Offices of Chance M. McGhee, our San Antonio bankruptcy attorney can review your specific situation and advise you of your options. We will help you determine whether your income and assets are exempt, and we can work with you to ensure that you can receive the relief you deserve. Call us at 210-342-3400 to arrange your free consultation.


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