Judgment proof means your income is a type or amount that is exempt from debt collection and you have no assets that a company has the right to take under New York State law. If you are judgment proof, this means that even if a company sues you and a court enters a judgment against you, the company cannot take any of your income or assets to pay the judgment.
New York State’s Exempt Income Protection Act or EIPA protects some types and amounts of money when a company sues you for a consumer debt like a bank debt, credit card debt, rent arrears, medical debt, or auto loan. When the only income you get is government benefits, child or spousal support, or retirement money, all that income is protected, or “exempt” under the New York EIPA law.
If all your income is exempt and you do not have any assets like a bank account over $3,000 or $3,600, or a house that you own, you’re considered “judgment proof.” This means that even if a judge decides that you owe money to a company and gives that company a judgment against you, the company isn’t allowed to take any money from you unless you agree to give it to them.
If you’re judgment proof because you only get exempt income, we generally do not recommend you agree to a settlement, payment plan, or other agreement with a debt collector or their attorney to give them this money that is protected by the New York EIPA law. The law protects these sources of income from debt collection because it is important you have enough money to pay for basic necessities like food and shelter.
Judgment proof does not mean a company cannot sue you to try to collect a debt. A more accurate term than “judgment proof” would be “collection proof,” because even if your income is exempt from debt collection, a company can still file a lawsuit to collect the debt and a court can still enter a judgment against you, but the company may not enforce the judgment against you by taking your exempt income.
Here are some things you can do:
Be careful: A company or their attorney can and may try to get you to voluntarily agree to enter an agreement (also known as a “stipulation of settlement”, “payment plan” or “settlement agreement”) to pay an alleged debt. If all your income is judgment-proof, you do not have to make or agree to a settlement, payment plan, or other types of agreement because all your income is supposed to be protected by law.
If a company sues you about a consumer debt, like a bank debt, credit card debt, rent arrears, medical debt, or auto loan, and you lose the case, the company gets a judgment. The judgment means the court decided you owe a certain amount of money. It gets bigger over time with interest and fees. The judgment gives the company the right to take certain types and amounts of money, with some exceptions.
These rules apply to consumer credit cases, which include:
Different rules apply if your debts are:
Under the NYS EIPA law, companies with judgments in a consumer credit case do not have the right to take everything you own. Certain types and amounts of income and property are protected or exempt from debt collection under the law and cannot be taken away without your permission no matter how much they claim you owe.
Under state and federal law, certain types and amounts of income are considered exempt (meaning they cannot be taken from you to pay a judgment).
The following types of income are exempt from debt collection:
Certain amounts of earned income are also exempt, including:
Certain amounts of income in your bank account are exempt.
If your bank account contains:
Yes, judgment-proof status can change if your income source(s) and/or amount changes.
The information in this document has been prepared by The Legal Aid Society for informational purposes only and is not legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. You should not act upon any information without retaining professional legal counsel.
Last Updated: 5 April 2022
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