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What does it mean to be judgment proof or collection proof?

While a creditor can always go to court to attempt to collect on a debt by filing a civil lawsuit and getting a judgment against a person for the unpaid amount, that doesn’t mean the creditor will be able to collect all or some of the debt, unless it is secured by collateral of some type.

On the debtor’s side, many continue to worry about a legal judgment against them even when they don’t have any property or assets that can be taken by the creditor. At that point, they are said to be judgment or collection proof.

Fortunately, a person’s Social Security and other federal benefits are automatically protected from collection by federal law. Also, if their benefits are electronically deposited, their bank account balance up to two times of their Social Security benefits is protected, but higher benefit amounts can be withdrawn by the creditor if available.

With certain exceptions, the West Virginia state law homestead exemption from collection makes only $5,000 of the value of your home protectible from creditors, but not automatically, and filing for bankruptcy can protect more. If medical expenses from a catastrophic illness are involved, an additional amount up to $7,500 of the home’s value can be protected from collection.

Having a civil judgment filed against a person has nothing to do with the criminal courts, and the debtor cannot be sent to jail over the debt.

If the debtor is a tenant living in a rental unit, he or she can’t be evicted because of the judgment.

The heirs of a debtor will not be responsible for paying the debt after the person dies, but the creditor may be able to file a claim against the estate if the judgment is still valid. That can reduce or eliminate the inheritance.

When a person’s financial situation makes them collection proof, they do not have to file for bankruptcy. The lack of collectible assets or property protects them from further actions by the creditor.

Some whose debts go to judgment have run up large credit card account balances. They may not be aware that credit card companies can charge very high interest rates which are legal in West Virginia because of the state laws where the company was incorporated.