What is being judgment proof? How does one determine judgment proof status? In order to answer those questions, one must first ask the following questions:

1)    Are you gainfully employed at the moment?

2)    Do you have any tangible property (vehicle, motorcycle, collectible, etc.) or intangible property (bank accounts, stock portfolio, etc.) with equity? Your property has equity when it’s either completely paid off or the remaining balance is lower than its current market value.

3)    Do you stand to receive any type of monetary compensation either due to personal injury, right to sue somebody, or inheritance?

If the answer to any of the questions above is “Yes,” then you are not judgment proof. When someone is truly judgment proof, it means that the creditors cannot collect anything from you even if they have a judgment against you. This person will have to be unemployed, equity-less, and with no hope of receive monetary compensation/inheritance in the foreseeable future. Judgment creditors can garnish your income if you’re gainfully employed; place a lien on your assets if your assets have equity; and/or seize any monetary compensation or inheritance that you stand to receive. Therefore, if the answer to any of the questions above is “yes,” you are not judgment proof.

For the purposes of question (1) above, unemployment compensation and/or income from social security are not considered income from employment. Therefore, you may still be judgment proof if your sole income is either unemployment compensation or social security.

Note, however, that there are certain exceptions as Florida judgment exemptions may apply. For example, if you stand to receive workers’ compensation due to injuries related to your employment, this compensation is exempt from any judgment. If you have the right to receive worker’s comp, and the answer to the first two questions is a “no,” you are still judgment proof. Another exception is your primary residence, IRA, 401(k), or any ERISA qualified annuity. To see the complete list of Florida exemptions, please click here.

“Judgment proof” status, however, is not permanent. Even if you qualify at the present, you will lose it in the future if you regain employment, come into a monetary settlement of any amount that is not exemption qualified, come into an inheritance, or asset of any kind (including paying off a property that did not have equity previously).

For more information regarding being “judgment proof,” please contact Kristy Qiu, a knowledgeable Fort Lauderdale Bankruptcy Attorney.