When a legal judgment is entered against someone and that person is unable to pay it due to having little to no assets, that person is considered to be judgment proof. As long as that person's situation remains the same, it will be impossible for creditors to collect on the debt. However, as soon as there are changes in the debtor's situation, creditors can take action. There are a number of circumstances which can lead someone to be considered judgment proof.
Being judgment proof is not a defense; creditors can take someone to court even if he or she has a minimal chance of being able to pay a judgment. Likewise, someone can file a civil suit against someone who would be unlikely to be able to pay a judgment. Instead, it is determined after a judgment is entered that the creditor is unable to pay it. Creditors may have income and assets which are considered protected because they are minimal, or income may be shielded by wage laws. Benefits from social services agencies, for example, are protected income and they cannot be taken by creditors.
When creditors win a judgment and are unable to collect it, they are unlikely to give up on the case. They will monitor the debtor for signs that the debtor's situation is changing in order to seize any wages or assets acquired. For example, if someone is deemed judgment proof because of unemployment and that person gets a job, the creditor may be able to garnish that person's wages until the judgment has been collected.
Creditors may also seek repayment of the judgment by other means. A cosigner on a loan, for example, would be expected to pay the loan if the original signer was judgment proof and no collection could be made. Someone involved in a civil suit might see if another person or entity could be considered liable and develop a second suit in order to collect a judgment. For example, if someone is involved in a car accident and the other driver is judgment proof, that person might sue the Department of Public Works on the argument that the road was not safe and this contributed to the accident.
People are sometimes encouraged to respond to demands from creditors with claims that they are judgment proof, or to ignore claims if they believe that they are judgment proof. This is not advised. Creditors can certainly be made aware of difficult financial circumstances which make collecting a judgment unlikely, but they can still choose to take the debtor to court; it is only after the trial that the court will determine that the creditor is judgment proof.
