You’ve probably heard the term “judgment proof” at some point or another and wondered what it meant. Judgment proof is a legal term for someone whose income and assets are exempt from garnishment or seizure by a creditor. Usually, this is by operation of law that an asset or income is declared to be free from the collection by a creditor. The best example of this is seniors who only receive social security or people with disabilities who receive SSI.

If you are judgment proof and a creditor gets a monetary judgment against you, the judgment is not worth the paper it’s printed on.

Although state laws vary on what income is exempt from creditors, the following sources of income are generally considered exempt:

  • Social Security income
  • Supplemental Security Income (SSI) income
  • Federal Railroad retirement accounts
  • Federal Employee Retirement System accounts
  • Civil Service Retirement System accounts
  • Money received for child support or alimony
  • Money in 401K’s or other ERISA retirement accounts

However, if you mix funds from another source with the funds listed above, creditors may be able to garnish the co-mingled funds. For example, you may only have income from Social Security checks in your bank account but then you sell that prized piano for $1,000 and put the money in the same account. By co-mingling the $1,000 with your social security income, the $1,000 could be subject to garnishment. This rarely happens though.

You might consider other assets of yours valuable, but it’s not likely a debt collector will have the same opinion. The time and cost required to sell household goods like furniture or china are not worth the return debt collectors would get.

Once you’ve determined that you are judgment proof, that alone should be enough to discourage debt collectors from trying to garnish your bank accounts. Some debt collectors are very aggressive however and will still try to collect in hopes that you are not aware of the law.

Exceptions to Judgment Proof Exemptions

There are some exceptions to being judgment proof and of course, they belong to the federal government. If you are behind on domestic support obligations, IRS debt, or student loan payments, the government can garnish your social security and disability checks. So if you have any of those debts and are otherwise judgment-proof – it is best to stay current with those payments.