In the context of
contract law
A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more Party (law), parties. A contract typically involves consent to transfer of goods, Service (economics), services, money, or pr ...
,
debt collection
Debt collection or cash collection is the process of pursuing payments of money or other agreed-upon value owed to a creditor. The debtors may be individuals or businesses. An organization that specializes in debt collection is known as a coll ...
and
civil litigation
Civil law is a major "branch of the law", in common law legal systems such as those in England and Wales and in the United States, where it stands in contrast to criminal law. Glanville Williams. ''Learning the Law''. Eleventh Edition. Stevens. 1 ...
, the term judgment proof is commonly used to refer to
defendant
In court proceedings, a defendant is a person or object who is the party either accused of committing a crime in criminal prosecution or against whom some type of civil relief is being sought in a civil case.
Terminology varies from one juris ...
s or potential defendants who are financially
insolvent
In accounting, insolvency is the state of being unable to pay the debts, by a person or company ( debtor), at maturity; those in a state of insolvency are said to be ''insolvent''. There are two forms: cash-flow insolvency and balance-sheet in ...
, or whose income and assets cannot be obtained in satisfaction of a judgment.
Being "judgment proof" is not a defense to a lawsuit. If sued, the defendant cannot claim being "judgment proof" as an
affirmative defense
An affirmative defense to a civil lawsuit or criminal charge is a fact or set of facts other than those alleged by the plaintiff or prosecutor which, if proven by the defendant, defeats or mitigates the legal consequences of the defendant's ...
. The term "judgment proof" instead refers to the inability of the judgment holder to obtain satisfaction of the judgment.
If a
plaintiff
A plaintiff ( Π in legal shorthand) is the party who initiates a lawsuit (also known as an ''action'') before a court. By doing so, the plaintiff seeks a legal remedy. If this search is successful, the court will issue judgment in favor of the ...
were to secure a legal
judgment
Judgement (or judgment) is the evaluation of given circumstances to make a decision. Judgement is also the ability to make considered decisions.
In an informal context, a judgement is opinion expressed as fact. In the context of a legal trial ...
against an insolvent defendant, the defendant's lack of funds would make the satisfaction of that judgment difficult, if not impossible, to secure.
Exempt assets
In some jurisdictions, some classes of income and assets are exempt from being accessed to pay a judgment. If a judgment debtor has income, it may be possible to get an order of garnishment to collect a judgment from that source of income. However, if the debtor's income is low or if the debtor is already subject to garnishment, in order to prevent the impoverishment of the debtor, the debtor's income may be exempt from additional garnishment.
United States
Some states do not permit
wage garnishment
Garnishment is a legal process for collecting a monetary judgment on behalf of a plaintiff from a defendant. Garnishment allows the plaintiff (the "garnishor") to take the money or property of the debtor from the person or institution that holds t ...
. If the debtor is living on income from
social security
Welfare spending is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specifically to social insurance ...
benefits, a retirement pension, or other social
welfare, garnishment may not be possible, as such income is usually protected against garnishment by creditors.
Cost of collection
The cost of collecting a judgment may also contribute to an assessment of whether a debtor is judgment-proof. If the amount that a judgment holder is able to collect from the debtor is insufficient to cover ongoing legal expenses and related costs of collection, collection efforts become uneconomical.
See also
*
Writ of execution
A writ of execution (also known as an execution) is a court order granted to put in force a judgment of possession obtained by a plaintiff from a court. When issuing a writ of execution, a court typically will order a sheriff or other similar of ...
References
{{DEFAULTSORT:Judgment Proof
Tort law