In some instances, a debtor may be what is commonly referred to as judgment proof. This means that the debtor has no assets that a creditor can collect. This typically occurs when an individual is collecting Social Security benefits, which are exempt from garnishment in most cases, and does not own a home or other asset upon which a lien could be placed to secure payment. In these situations, individuals will often stop making payments to creditors rather than file for bankruptcy, thinking that there is nothing their creditors can do to get to them, which is often far from the case.
The phrase judgment proof can be quite misleading. While it is true that creditors typically cannot garnish Social Security benefits that does not mean that they won't try to get at your money regardless. Once you stop paying your bills, creditors will eventually charge off your account and sell it to a collection agency. This agency will start calling you several times a day badgering you to pay your debt. You may very well explain to the collector that you do not have the money to pay, but that doesn't mean the calls will cease.
At some point, it is very possible that the creditor will sue you and obtain a judgment against you to collect the debt. You would need to appear at court to provide testimony and supporting documentation to prove to the court that you only receive Social Security and that you have no ability to pay. If you do not show up, a default judgment will be rendered against you. Once a judgment is received, the creditor can serve a levy against your bank account. Since your bank does not necessarily know that all funds in the account are Social Security benefits and are exempt, the bank may very well take the funds from the account. If this happens, you will have to take the necessary steps to prove that the funds were, in fact, exempt, and then wait for the money to be returned to you. While you wait for the money to be returned, you may be unable to pay your bills and other essential living expenses.
Rather than deal with this uncertainty, it might be better to go ahead and seek bankruptcy protection. Bankruptcy stops all collection activity, stops garnishments, stops levies, and stops harassing collection calls. Most bankruptcy lawyers offer free consultations. Once a bankruptcy case has been filed, creditors must cease all collection activity, and chances are most of your debt will be wiped out in a matter of a few months.
If you live in the St. Louis area and are experiencing financial hardship, you should contact a St. Louis bankruptcy lawyer today.