At times, debts can become impossible to pay. When this happens, you may find yourself frustrated, especially if you have no source of income to sustain yourself and your family. However, our legal system provides a “shield” that sets out to protect debtors against creditors in the event that they don’t have assets to furnish the debts. The term governing this is what is commonly known as judgment proofing.
But what is judgment proofing? Who is eligible for judgment proofing, and who isn’t eligible? Here are some of the answers to these fundamental questions.
Understanding Judgment Proofing
A scenario emerges where you owe a creditor a huge sum of money. However, you are unable to pay, and the creditor goes to court seeking to get a money judgment against you. If a money judgment is issued, then the creditor can employ various methods to collect the amount you owe them.
However, if you don’t have any income or assets that the creditors can use to recoup the amount you owe them, you are termed judgment proof. In other words, the creditors have nothing to seize for payment despite having the money judgment.
In addition, judgment proof also means that your property and income are exempt by law from the creditors’ claim-meaning they can’t take them from you.
Who is eligible for judgment proof?
Judgment proofing typically means that you have no assets that the creditors can seize for payment. As such, eligibility is denoted by the following:
- You don’t owe anything of significant value apart from the exempt property.
- Your income is from an exempt source, for example, retirement benefits or social security disability income.
How long does judgment proof last?
Judgment proof typically lasts for ten years. This means that the creditor can renew the court’s judgment against you every ten years. Also, it is imperative to note that if your financial situation improves, then your creditors might come after you and your assets.
How can you protect your business against creditors?
Asset protection is essential, especially for your business. If you have debts, it is imperative to consider all the viable options available to prevent creditors from seizing your assets. One of the viable options available is to join a membership association that can guarantee you the protection you need.
Put simply, a membership association like the Proadvocate Group can ensure your assets are protected by private contracts under the constitution. This means that the assets can’t be collected under any judgment.
Contact us today to learn more about judgment proofing.