I absolutely cringe when I hear the term judgment proof. I originally wrote this blog several years ago. It makes more sense than ever now that the majority of phone calls I get are from debtors who are now facing post judgment collections. Just because you do not make a high income does not mean that the creditor cannot garnish a checking account, or create a cloud on title which can slow down the sale of your homestead.
Many of the people that I talk to seem to believe that they are judgment proof or not worth suing just because they are not rich (whatever that is), or maybe they are going through a rough period in their life. While Texas law provides a number of protections, also known as exemptions, from collection, this does not mean that you can just ignore attempts at collection or lawsuits from creditors.
Did you know that there is no way to exempt your checking account? You may think that you are safe because you only have a few dollars left at the end of the month, but what if a judgment creditor was able to garnish those funds right after you got paid, leaving you with little to nothing to pay your bills with? Still feeling judgment proof?
NOTE: Certain sources of funding such as social security payments may be exempt from collections, but it is your burden of proof to show that they are exempt.
Another thing about getting a judgment is that it creates a cloud on the title of your home. When a plaintiff is successful in obtaining a judgment in court and the deadline for appeal has passed, the plaintiff can then petition the court for a document called an Abstract of Judgment. They can then file this Abstract of Judgment in the deed records of the county where you live. These are public records. This Abstract of Judgment will then be reflected on your credit report. While creditors cannot take away your homestead, the lien will show up anytime someone researches your house, such as a potential buyer or an oil and gas landman wanting to lease or buy your mineral rights. When you go to sell the house, if you attempt to get title insurance on your new home, the title insurance provider may very well stipulate that you pay off this lien before you can get title insurance or sell your house.
An Abstract of Judgment is good for 10 years. At the end of the period it may be renewed for another 10 years on request of the creditor. While you may be broke now it does not mean you will be this way forever. However, with an outstanding judgment, if you get a nice raise at your job, a better job, an inheritance, a nice judgment against someone else, or win the lottery, that judgment creditor will want a piece of the action.
Debt collectors that secure an Abstract of Judgment against you may not be able to collect anything immediately from you, but they can wait until you either need to sell your home or receive money from someone else, such as an inheritance. They will be promptly notified that your financial situation is changing, and they will be ready to collect before you can do anything to avoid them. Don’t expect you are not judgment proof until you review the facts of your case with an attorney. Call me today.