What Does “Judgment Proof” Mean?

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If you've ever had a personal injury case or have talked to Attorney about filing a lawsuit against a private party, you've probably heard the phrase “judgment proof”. It is a phrase that attorneys use so frequently that sometimes it's easy to forget that it is not a common term used by many non-lawyers.

The term “judgment proof” essentially means that the individual does not have sufficient assets or resources to make a lawsuit against them worth your time and money, which seems ridiculous. Most people would assume that once a judge or jury says that the defendant owes you money, they must pay up regardless of their circumstances. That is true to an extent, but practically speaking if the defendant is “judgment proof” then the odds of you receiving any money from them are slim to none.

Consequently, most attorneys will investigate a potential defendant before taking a case and if they cannot locate sufficient assets to cover the cost of litigation or potential recovery, they won't take the case even if there is a legal cause of action.

Texas Law Protects Certain Assets

You might be surprised to learn that most people are judgment proof - some intentionally so by protecting their assets in layers and layers of business entities and some just because that is their reality. The purpose behind these exemptions is to prevent an individual from becoming a ward of the state and relying on public benefits as a result of a private legal action.

Texas property code protects some basic assets from being sold due to a judgment. That means that even if the assets have significant value if it's covered under the law. Then the court cannot force the defendant to sell that asset and give you the money from the cell even if it is to satisfy a judgment or verdict. Assets that are protected include an individual's homestead, there are tools of the trade, household items up to $30,000 for a single person and $60,000 for a family, vehicles- one for each licensed driver in the house, etc. additionally some kinds of income are safe from creditors including Social Security, veterans’ benefits, public assistance, and unemployment benefits, etc.

So, you see, the list is pretty extensive and covers the majority of people. Unless the individual has multiple rental properties or vehicles or other significant assets, they are typically judgment proof outside of the applicable insurance policy. In other words, for most plaintiffs the best - and practically speaking only - source of recovery from a defendant is through their insurance policy.

How Can I Find Out If Someone Is Judgment Proof?

Most attorneys will hire an investigator to look into a potential defendant to determine whether or not they have attachable assets. The investigators will often comb through business filings, property records, and other court records to see if they can locate sources of recovery.

You can perform these searches yourself as well. Every county has a central appraisal district database wherein properties can be searched by the owner, address, or legal description. using the CAD database, you'll be able to determine if a potential defendant owns multiple properties. It's important to know that the homestead exemption only applies to one property and even then, is limited in value.

You can also search the Texas Secretary of State's website for any business filings linked with the defendant. Surgeons typically run a dollar a search and can take quite a bit of time to read through all the results, but it's certainly possible to find links and other forms of recovery.

Lastly, in this day and age, most court records can be found online, and you can see if they've been other causes of action against the defendant if there have been other judgments and if there are any other liens against them.

So, If Their Judgment Proof, I’ll Never Get Money – Ever?

Not necessarily. When you get a judgment against a defendant you essentially become a creditor of theirs. there are a lot of attorneys that specialize in recovering money from a defendant. Essentially, you file the judgment in whatever county the defendant is located and where they have potential assets, and if they come into money at some point, your right as a creditor is protected with some caveats. First, any creditor that filed their interest before you will take precedence over your claim. Secondly, liens filed by the state of Texas and or the federal government will supersede any other creditors that were previously filed, which means they get their money first. If there are multiple creditors on file, typically they'll settle for pennies on the dollar or they won't actually see anything before the money runs out.

Debtor-Creditor law is a very new story of law that we do not practice regularly so if you have questions I strongly advise you to contact an attorney that does.

Talk to An Austin Accident Attorney

If you have any questions about filing a personal injury lawsuit, hire an accident attorney or at least talk to one before filing suit. These matters get complicated very quickly and you will always benefit from an experienced accident attorney.

Categories: Personal Injury