What Happens When You Have a Judgement Against You and You Cannot Pay?

If you have tried to work with your creditor and he is unwilling to accept partial payments from you or if you simply cannot pay your debt, a creditor may take you to court. In court, if you have no valid defense the creditor most likely will win and a judgment will be ordered against you. You certainly must want to know what happens when you have a judgment against you and you are unable to pay?

The court ordered verdict allows the creditor to legally go after assets that you have. However, because a creditor gets a court order he still may never collect a dime from you. Each State varies, but there are certain items that a creditor cannot touch in his attempt to try to recoup his monies. To determine what the creditor can take from you a legal proceeding is held to discover what assets you actually hold.

At the asset hearing, you will need to bring certain documents such as tax returns, check registers and pay stubs. These items will be examined by the creditor's attorney to determine what your income is and what private assets you own. If it is determined that you have no income or property that your creditor can take, the court order is essentially worthless. You are considered "judgment proof". As you can see, when you have a judgment against you and you have few if any assets, you should feel less frightened about your future.

Now that you know what happens when you have a judgment against you and you cannot pay, it is important to understand that each State differs on the value of assets you can have. It is still possible to have a certain income and assets including a house with little equity, a cheap car, personal effects and some private property and still be untouchable by the court's verdict. You will need to speak to an attorney in your State to determine your specific asset situation as each State has its own asset schedule.

One interesting note is that at one time in the United States and also in the United Kingdom, there was something known as "debtors' prison." People were actually incarcerated for being unable to pay their debts. These laws were changed in the US and UK in 1833 and 1869 respectively. Today there is no such thing as incarceration for unpaid debt except in cases of fraud, child-support or alimony.

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