The statute of limitations on judgment collections can be very long and is usually renewable. This allows a persistent creditor to continue collection efforts for decades, in some cases. In addition, judgments can remain on a debtor’s credit report for as long as it takes to collect the judgment.
However, laws also recognize the importance of not allowing a creditor to entirely impoverish a debtor through bank account levies, wage garnishment, or property seizure, even when collecting a legitimate debt. State laws exempt certain types of assets and income from being seized by judgment creditors for the payment of most debts. Here are some examples:
- Social Security Benefits (retirement, SSDI, survivor’s benefits)
- Supplemental Security Benefits (SSI)
- Public assistance benefits
- Unemployment benefits
- Veterans benefits
- Civil service and federal worker retirement benefits
In addition, state laws often exempt certain assets, or a percentage of them, from seizure. For example, a judgment creditor may be required to leave a certain amount of money in a bank account after levying to collect what he or she is owed. In general, people who don’t own property, have little savings, and minimal or protected income, are usually judgment proof.
There are situations, however, in which normally protected assets are subject to seizure. The type of debt matters: Back child or spousal support, tax debt, or judgments involving criminal activity may result in having exempt assets seized, garnished, or levied.
Debtors should also be aware that creditors have the right to have the debtor periodically ordered to come to court for a financial examination. Before the financial examination, the debtor is sworn in by a court clerk. The debtor is then required to disclose, under oath, all sources of income and assets. If a debtor’s situation changes, such as by getting a new or better job, he or she may no longer be judgment proof and may be vulnerable to collection efforts.
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