Judgment-proof debtors have an imperfect shield
By Fred O. Williams
Amazingly enough, your belongings can be seized on the spot. The cash in your wallet is not exempt; the watch on your wrist is not necessarily exempt.
|-- Martin Wegbreit
Central Virginia Legal Aid Society, Richmond, Va.
It is important to know that, even if you're judgment proof, you may be made uncomfortable. Some creditors may do their best to maximize your discomfort as leverage for payment, lawyers say. Having your employer told to deduct sums from your pay can be embarrassing. And in most states, a judgment creditor can summon you to answer questions about your income and assets. In some jurisdictions, it's a good idea to remove your jewelry before you go, and to empty your wallet.
"Amazingly enough, your belongings can be seized on the spot," said Martin Wegbreit, director of litigation at the Central Virginia Legal Aid Society in Richmond. "The cash in your wallet is not exempt; the watch on your wrist is not necessarily exempt."
Police could bring you in
Failing to attend the proceeding, called a "debtor's examination" or "debtor's interrogatories," is risky, as the court may issue a warrant for police to bring you in for failing to appear. In some jurisdictions creditors routinely use courts to collect this way. "In many arrest warrant cases, judges will order that the bond which the defendant paid be released to the judgment creditor," Maryland University law professor Peter Holland wrote in his analysis of the debt buying system. However, backlash against the practice has developed after articles in the Minneapolis Star-Tribune and The New York Times examined what has been called a modern form of debtors' prison.
"I don't think the sheriff is going to go out looking for you," said Fred Schwinn, a consumer lawyer in San Jose, California. "But if you get pulled over for something else, they could bring you in."
Another risk of toughing out a judgment is that the creditor will resurface -- perhaps years later -- when you are flush. "Debt collection attorneys at times frisk their old files for judgments to try to collect," Schwinn said. Debt buyers monitor credit reports for signs that your circumstances have improved, such as a new address or a new job. "They're using analytics to determine what cases they'll file." Given the lengthy life span of a debt judgment, it is not safe to assume the debt will be forgotten.
Main story: Court judgments for debt: after the gavel