Dear Liz: I felt really bad for the 74-year-old woman whose adult children discovered she had $41,000 in credit card debt. Is bankruptcy really her best option? Maybe she’s “judgment proof” because of her lack of assets. Bankruptcy is expensive to file. If her creditors can’t sue her, she might be better off just not paying.
Answer: She may well be judgment proof, which means she doesn’t have income or assets that can be seized by creditors. Social Security income is exempt from creditors’ claims, for example, and other property (personal belongings, clothing, furnishings) is typically exempt by state law.
Her being judgment proof wouldn’t necessarily stop creditors from suing but would prevent them from doing anything, at least initially, with the judgments they win against her. If her circumstances improve dramatically — if she inherits money or wins the lottery, for example — the creditors could use their judgments to collect.
Some people who are judgment proof file for bankruptcy anyway to stop collector harassment and legally wipe out their debt. Others opt to simply do nothing. The best course depends on her situation, and she’d be smart to consult with a bankruptcy attorney about her options.