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What is "judgement proof" (Florida)


wipedout
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Hi all, new here, 1st post. I look forward to soaking up a lot of knowledge in here, as I prepare for my battles.

Due to a lot of circumstances, I've been forced to stop paying on a couple big cards (~$30k balance). The cards aren't with the 2 big lawsuit happy creditors (C1 and Disc), however, I'm paranoid that a lawsuit may eventually be filed, because of the amount of debt, unless I can eventually settle them. (before charge-off, or even after, with help from family, or a 401k loan).

As the title states, I'm trying to understand exactly what "judgement proof" is, especially pertaining to FL residents, as it seems that it is almost impossible for a creditor to garnish wages in our state (if I'm reading the laws correctly). After reading over and over, I'm still confused. What I get from it is that if you provide more than 50% of your family's well-being, AND make over $500/week, you have to agree to allow a creditor to garnish your wages, in order for them to garnish? Huh?

We have no assets that aren't covered by debt. 2 cars, 1 with negative equity, 1 with a little equity. No CD's, stocks, investments, savings, cash, etc. We only have jobs, and live paycheck to paycheck like a lot of other people. We are renters. The house we own with mortgages, is underwater big time, and may be FC'd on by end of year (house is in another state).

I'm still doing my research, so I will at least be able to answer a suit if one is filed, and go from there. Chapter 13 is my absolute last resort, and won't even think about it unless I can't manage to settle my bad debts. There is also a charged-off heloc in the picture. I definitely won't have the means to try to settle that one, so if they sue, I may ultimately have to file 13, not sure. Of course, all of this is moot, if I am protected under FL's laws, since I pretty much have 0 assets...only a job.

Any insight would be appreciated. Thanks!

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Broke (everywhere)

It means your assets and/or income fall below the minimum amount that the law allows you to keep. Anything beyond that minimum can be taken by the courts to pay judgments/creditors.

I don't know Florida--I'll let someone else help you there. (It varies by state.)

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Guest usctrojanalum

judgment proof is a state of being, sometimes permanent, sometimes temporary. What it essentially means is that you do not possess any assets that can be garnished by a creditor at any given time.

And even if you do have assets, they may fall under exemptions allowed by the law. As such in FL with a garnishment, they have a HoH exemption (head of household) where if you are the "breadwinner" for your family you are exempt from a wage garnishment.

Just one thing, whatever you do - DO NOT TAKE OUT A LOAN AGAINST YOUR 401K TO PAY OFF DEBTS. This should almost never be done, and I do not know anyone who would recommend it. Only in the case of an absolute necessity would I ever consider using that money (i.e, to pay rent or for other items necessary to live)

A 401K is EXEMPT income, so I would never ever advise anyone to pay off a debt with a loan against it.

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Thanks for replying MisterLoon.

Believe me, I'm broke (everywhere) :(

As I understand it (I've been wrong before), there is no clear definition of "judgement proof", it's just a hypothetical term. The way I interpret it is that the creditor looks at your income, assets, etc., to see if it is worth their time and $$$ to come after you. If there is nothing there, they may not come after you (except for an attempt to get a default judgement, which I plan to hinder). Since I have 0 assets (that aren't covered by debt), I think I'm halfway there...except I have a job, and we make decent money (which all goes right back out for other debts, groceries, etc.). There are a few states which don't allow wage garnishments for consumer debt, period. FL isn't one of those states, but they do have a very strict wage garnishment procedure, which I don't completely understand. I would assume that if I lived in a state that doesn't allow wage garnishment for consumer debt (NC/PA/SC/TX), that I would be 100% judgement proof, but I don't.

I guess what I'm looking for is clarification on the FL wage garnishment laws, and also feedback from others who might be familiar with FL laws, and/or who might have gone through a lawsuit initiated by a CC company/collection's agency, or their lawyers.

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As such in FL with a garnishment, they have a HoH exemption (head of household) where if you are the "breadwinner" for your family you are exempt from a wage garnishment......

DO NOT TAKE OUT A LOAN AGAINST YOUR 401K TO PAY OFF DEBTS.

Thanks for replying usc. You give sound advice about the 401k, and I completely agree. I'd rather stiff these creditors now, and enjoy retirement later. However, If I can negotiate some kind of really cheap settlement, and avoid a 10 year judgement lingering over my head, I would quickly hit the 401 so I can move on with my life, only if I'm not able to borrow from a friend or family. Yes, 401k is last resort, just before BK 13. I spoke with a BK attorney, and he advised me filing. After some research, I decided to give the debt settlement a try on my own.

As far as the FL HoH, I've been researching it, and am still trying to understand it. From what I've read (going on memory here), if you are HoH, and make less than $500/week, they can't touch your wages. If you are HoH and make more than $500/week, you have to "agree" to "let them" garnish your wages...lol, that confuses me. Is it that easy? "No, I won't allow you to garnish my wages!".

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http://www.floridabar.org/TFB/TFBResources.nsf/0/10C69DF6FF15185085256B29004BF823/$FILE/Civil.pdf

http://www.miamidade.gov/csd/library/collecting_judgement_09.pdf

Start studing fl rules of civil procedure fight them,post your cases thousands will answer.

Appeal No. 05-0005AP-88A

He walked on 14 large just have to do some work and study in one month you will be helping others.

Edited by racecar
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“Judgment proof” is one of those terms that doesn’t mean what you hope it does. In fact you might be judgement proof and still have a court place a judgement against you and the judgment will appear on your credit report. Think of judgment proof as being the same as ”collection proof.’ If a creditor can’t collect from you, there is little incentive for the creditor to file a legal action against you and there is little reason for a judge to award a judgment to a creditor that can’t be collected. However, even if you are judgment proof and a creditor files against you, you or a legal representative need to appear at the hearing and defend against the judgment. You want to make sure that both the creditor and the court understand that there are no assets to attach or income to garnish. In many cases the creditor will even file a case against a debtor who is judgment proof. It’s a waste of time and money on their part.

The true test of being judgment proof is whether the creditor who wins the judgment against you can collect anything from you. If not, you are considered “judgment proof.” In every case the amount a judgment creditor can collect will depend on your income and assets. In many cases the amount a judgment creditor can collect will depend on where you live. Some state laws provide more protection against creditors than others.

The first step in being judgment proof is to have income that can’t be garnished or levied. In my particular case, my income was derived solely from military retirement. A creditor can’t garnish or otherwise levy a military pension. In fact most retirement accounts are protected from judgment including Social Security. (However the IRS can attach your military and social security retirements.)

You don’t have to be retired to have income that can’t be garnished or levied. Besides retirement income, income from the following sources are generally exempt from collection by debtors:

■Veteran’s Benefits

■Disability Payments

■SSI – Supplement Security Income

■Life Insurance Proceeds

■Police and Fireman’s Pension Income

■Unemployment Insurance Payments

In some states, a certain amount in income may be exempt from garnishment and levy. For example, in Florida 100% of the income of the head of household is exempt from collection by a judgment creditor. So in my case, since I am retired and my wife earns more than I from her salary, all our income is exempt from collection. She is the primary bread winner and head of household. I’ll refer you to this page for more information broken down by state of residence.

The next test of being judgment proof – or collection proof – is the test of your assets. Generally the equity in your home is exempt as long as it is your homestead. This is not true for rental property. Besides your homestead, it is difficult to make a general statement about protecting assets from collection. Generally speaking a creditor will not seek to attach household furnishings and personal items unless they are high value. An example might be expensive jewelry, expensive cameras, antiques, or even expensive high definition televisions. The court may require you to disclose all your assets and income if a creditor is awarded a judgment. If your assets are protected by bankruptcy, they will also be protected from judgment. I should add that assets pledged as collateral are never protected. For example, if you have a loan on a vehicle then your vehicle is collateral for the loan. Even though your state asset exemptions might provide for an exemption for an automobile, normally at least $1000, the exemption does not apply to a vehicle pledged for a loan. I’ve provided a Google search window above for you to search for your state’s bankruptcy exemptions. For example search; Texas Bankruptcy Exemptions.

Being judgment proof is a critical element in making the decision to quit your debt. If you are not judgment proof you have to carefully evaluate the consequences of having a judgment against you. You may also want to consider how you might become judgment proof.

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Thanks for all that great information, and words of encouragement racecar! I have a lot more reading to do....

Here is why I am a bit confused about the wage garnishment laws in Florida. The way I read it, is that the only way they can garnish my pay or bank account, is if I agree to let them do so? Also, regarding HoH/breadwinner, how is that established? Is it open to interpretation, i.e., who spends most of their money to support the family? Or is it based solely on the gross income of each spouse? Or is it based on how you file your taxes (married filing jointly has no HoH, I don't think)? For example, spouse #1 makes less money than spouse #2, but spouse #1 provides all health insurance and benefits to the family, pays rent, groceries, etc. Spouse #2 uses their paycheck for car payments, debts, etc. If the HoH is open for interpretation, is it possible that spouse #1 would be able to: "You must file an affidavit with the court to declare your head of family status and protect your wages from being taken."?

"Wages of the head of a family are exempt from garnishment unless the person's net wages are more than $500 per week and the person has agreed in writing to allow wages to be taken to pay the debt. A head of family includes all persons who reside in Florida and who provide more than one-half of the support for a child or other dependent. Wages in a bank account that belong to a head of family retain their protection from being seized for six months even if the wages are mixed with money from other sources. If a head of family had not agreed in writing to allow the garnishment or attachment of wages, all the wages are exempt. You must file an affidavit with the court to declare your head of family status and protect your wages from being taken."

As far as your statement:

"I should add that assets pledged as collateral are never protected. For example, if you have a loan on a vehicle then your vehicle is collateral for the loan."

I think I understand that. However, would a creditor even consider trying to seize/sell a vehicle that is upside down, considering they would have to pay off the loan to retrieve the title, and would likely be in the negative? Sure, if I had a paid off vehicle that is worth $5k or so, I'm sure they would come and get it, but I can't imagine they would want to come and get something with negative equity...but I just don't know.

In the mean time, I will start studying FL rules of civil procedure, to prepare myself for what might be inevitable.

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Usctroganalum is absolutely correct about your option of a 401(k) loan. Under no circumstances, should one even consider taking out a loan against their 401(k).

In Florida, Head of Household income is 100% protected against garnishment.

However, if your objective is to simply avoid a judgment, being judgment proof may not be your answer. It may not avoid a judgment:

Being judgment proof actually means you are "judgment EXECUTION proof," which means they could still get a judgment against you, but perhaps cannot execute it, at least for right now. In Florida, a judgment can remain for 10 years. At that time, the judgment can be renewed for an additional 10 years. If at any time during that 20 years you are no longer judgment proof, they can "execute" the judgment.

On the other hand, most JDBs, once they realize you are judgment proof, are no longer interested in you and would not pursue you. It is not cost effective to continue pursuit. But no guarantees.

If you are sued, an affirmative defense can be that you are judgment proof. You could simply state it in your affirmative defense, or attach an affidavit to that effect, listing the reasons you are judgment proof. Examples:

1. I am Head of Household (Example: I have a disabled child living with me for whom I supply 50% or more of her support.)

2. My husband is on Social Security Disability, and we only have one bank account in which our funds are co-miingled. (cannot attach your bank account)

3. I live in a homesteaded home (A homeowner living in their home on which they have a homestead exemption means they cannot attach a judgment to that home.)

4. I have no retirement assets.

5. I am self-employed and have no garnishable wages.

6. I have no equity in any vehicles (including campers, boats, rvs, etc.)

7. I have no other assets.

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The wage garnishment is if you make MORE than 500 a week. So if your paycheck is for example 900 for 2 weeks you are excempt, but if it's 1020 they can try to garnish those 20 bucks. I don't recall all the law, since I make less than 1000 on a 2 week period and they can't garnish my wages, but if you make more there's a max they can take, and certain rules apply. Even if your wages are excempt they can still try to garnish them, and then you got to file a wage garnishment excemption.

In Florida if you got a joint account with your wify they cannot freeze that account, also. 401k is excempt also.

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In Florida, Head of Household income is 100% protected against garnishment.

I think I get this now. I guess my final question regarding "HoH" is if there is an absolute definition of who the HoH is. Depending on which paycheck we are talking about, sometimes I make more than my spouse, sometimes they make more than me. However, I provide all health insurance/benefits to my family, provide the roof, food, etc. We own no property in FL.

However, if your objective is to simply avoid a judgment, being judgment proof may not be your answer. It may not avoid a judgment:

Being judgment proof actually means you are "judgment EXECUTION proof," which means they could still get a judgment against you, but perhaps cannot execute it, at least for right now.

That sounds good. Perhaps I used the wrong terminology. My primary goal is to be able to eventually settle with these 2 creditors, for a reasonable amount that I can afford. I would like to avoid a lawsuit if I can, but am trying to prepare myself for one, which likely won't happen for at least several months, if ever. From what I've read, lawsuits generally won't happen until at least after charge-off, several months or years after, or never. It also seems that settlement talks can happen anytime before a lawsuit, during, or even after a judgment, and the best settlements seem to happen when the debt has been with a CA for a long time. My goal is to not have a judgment against me. However, I'm trying to learn all of the processes and laws for FL, so I will at least have a chance to answer/defend myself when/if the time comes. Obviously I won't be able to hire counsel, or else I'd just pay the debt! And the more I am learning, the more that I am realizing that even if I do lose a suit, it isn't the end of the world (thanks to the "debtor friendly" state of FL) :D

If you are sued, an affirmative defense can be that you are judgment proof. You could simply state it in your affirmative defense, or attach an affidavit to that effect, listing the reasons you are judgment proof. Examples:

1. I am Head of Household (Example: I have a disabled child living with me for whom I supply 50% or more of her support.)

That is interesting to know, than an affirmative defense is actually the fact that I am broke? Also, how did you know that #1 applies to me? (DS).

Thanks for all your help! I will continue to research, and develop my plan.

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One other thing to remain aware of:

Just because you're judgment proof does not mean that a creditor won't pursue the judgment--even if you're flat broke.

Judgments have both present and future value. A judgment can be sold (in many if not most states). Or, alternatively, they may pursue a judgment because they believe you're too vulnerable to effectively protect what little assets and income you have, or they believe your future earning potential warrants the effort, or they may just hope you hit the lottery.

Also, a judgment on your CR can effectively lock you out of the credit market and therefore they can use it to hold your credit hostage and wait you out.

It's amazing how many judgments get paid when people decide they want to buy a house.

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