I have had several clients in the last few years whose cases I did not take because they were judgment-proof. This is usually the designation that I reserve for someone that is under these or similar circumstances:
- Has only Social security income or other income exempt from garnishment, levy or other process.
- No real property
- No non-exempt assets
This person is judgment proof in that a creditor, upon filing a suit against this person and getting a judgment cannot enforce the judgment. The tools that they would usually use to enforce a judgment are useless against such a person. They cannot garnish his wages because Social Security and Qualified Retirement income is exempt from garnishment/attachment. They cannot put a judgment lien on his real property if he does not have any. They can ask the court to hold an asset hearing to see if there are any non-exempt assets to be sold but, again, if there are none, there is nothing they can do.
Having said all that, there are circumstances where people that, at first glance seem judgment-proof should nevertheless file a bankruptcy case. A bankruptcy attorney and a client that may be judgment-proof but that has significant exempt assets should give consideration to his future heirs. Not that bankruptcy should be used in an estate plan, it seems appropriate consider the impact to the estate that the debt poses.
I took on a client who has ailing health that will never feel the ill effects of the enforcement of a judgment but that has real property which is subject to a judgment lien which is avoidable in a bankruptcy. Her whole purpose in wanting to file is not to benefit her as much as it is to preserve her estate for her kids.
I have had several client that called, and once I told them the worst that could be done to them is that a lien is placed on their home they told me that they would just not worry about it then. I am always quick to add that just because they will not feel the effects of it in their life, does not mean that it goes away at death. Their estate will be diminished by their debt when they die.