What Happens If Someone Sues You and You Have No Money?
You Could Face Wage Garnishment or Asset Seizure
If you’re sued and don’t have the funds to pay the judgment; the court could order wage garnishment or asset seizure. This means a portion of your paycheck gets taken automatically – until the debt is paid off. The same goes for any bank accounts, vehicles, or property you own; they’re fair game for the creditor to seize.It’s a crummy situation, no doubt. But there are some protections in place, like:
- Federal benefits (Social Security, disability, etc.) can’t be garnished
- Some states exempt a portion of your wages from garnishment
- Certain assets are exempt from seizure (clothing, household items, tools for your trade)
So you won’t be left totally destitute. But still, having your income/assets taken is a major headache – one you’ll want to avoid if possible.
-You Could Be Held in Contempt of Court
If the court orders you to pay and you simply refuse or ignore it, that’s contempt of court – which can land you in jail. Yikes.Now, debtors’ prisons are technically illegal in the U.S. But you can absolutely be jailed for a short stint as a “contempt sanction” to force your compliance with the order.So yeah, not paying is a bad idea all around. The court has ways to make you pay one way or another.
You Could Seek Bankruptcy Protection
If you’re truly broke with no way to pay, bankruptcy may be an option to discharge (wipe out) the debt. But keep in mind:
- Bankruptcy has major credit consequences that last 7-10 years
- You’ll have to pay court fees and costs upfront
- Not all debts are dischargeable (student loans, taxes, child support, etc.)
So it’s not a magic wand solution. But it can provide relief as a last resort if you’re judgment proof with no assets or income to go after. Just be sure to weigh the pros and cons carefully.
You Could Try to Negotiate a Settlement
If paying the full judgment isn’t feasible, you may be able to negotiate a partial settlement for less. This requires the creditor’s cooperation, but it’s worth exploring – especially if you can get the deal in writing and settled.Some key tips:
-- Gather proof of your financial hardship (pay stubs, bills, etc.)
- See if the creditor will accept a lump sum lesser amount to close the case
- Or set up an affordable payment plan you can actually stick to
- Get any settlement terms in writing before paying a dime
- Ensure the creditor will stop pursuing the full judgment after settlement
It’s not a guarantee, but creditors are sometimes willing to take a discounted settlement – especially if it’s more than they’d get from garnishing your wages. It’s worth a shot.
You Could Request a Payment Plan from the Court
If negotiating with the creditor fails, you can ask the court to set up a payment plan based on your income and expenses. This involves:
- Filing a motion explaining your financial situation
- Providing documentation like pay stubs, bills, etc.
- Attending a court hearing to plead your case
The judge will then decide whether to allow payments and how much you can reasonably afford each month. It’s not ideal, but it beats having your wages garnished with no say in the matter.Just be sure to make all payments as ordered – or you could face penalties for violating the court’s order. But it’s an option to stay out of contempt if you’re struggling.
You Could Appeal the Judgment (With Grounds)
If you have legitimate grounds, you may be able to appeal the judgment and get it overturned or reduced. Some potential grounds include:
- Errors in applying the law or admitting evidence
- Lack of proper notice or service of the lawsuit
- Newly discovered evidence that could change the outcome
- Fraud, misrepresentation, or misconduct by the other party
But you’ll need solid legal arguments and typically have to post an appeals bond too. So it’s not easy. You’ll likely need an attorney’s help.
-You Could Claim Exemptions or Protections
Depending on your state’s laws, you may be able to claim certain exemptions or protections to shield some of your income and assets, such as:
- Head of household/wildcard exemptions
- Exemptions for your home, car, tools of the trade, etc.
- Protections for Social Security, disability, retirement, and other benefits
An experienced attorney can review your situation and ensure you’re taking advantage of all available exemptions to minimize the judgment’s impact.The key is being proactive and exploring all potential options and defenses. Ignoring the problem will only make it worse in the long run.
Seek Legal Counsel to Understand Your Rights
If you’ve been sued and can’t afford the judgment, your first step should be consulting a local attorney to go over your rights and options based on:
-- The type of debt/judgment
- The creditor’s actions so far
- Your current financial situation
- Applicable state laws and protections
An experienced lawyer can guide you through the process, ensure you’re not being taken advantage of, and fight to minimize the judgment’s impact on your life. Many offer free initial consultations too.While it’s stressful, you do have rights as a debtor. So don’t just roll over and let the creditor clean you out. Get proper legal counsel to protect yourself.
Key Takeaways
Getting sued when you’re broke is an awful predicament. But you do have some options and rights, such as:
- Claiming exemptions to protect income/assets
- Requesting an affordable payment plan
- Negotiating a lesser settlement amount
- Filing for bankruptcy as a last resort
- Appealing the judgment if you have grounds
The worst thing you can do is ignore it and risk contempt charges or aggressive collections. Be proactive, know your rights, and get legal help to deal with it properly.
It may be an uphill battle, but you’re not completely defenseless when creditors come knocking. With the right approach, you can hopefully make it through in one piece.
There are a number of specific laws and legal precedents that come into play when someone sues you and you have no money to pay a judgment. Here are some key ones to be aware of:
- Fair Debt Collection Practices Act (FDCPA) – This federal law prohibits abusive, deceptive, and unfair debt collection practices by creditors. It gives you certain rights, like the ability to dispute debts and stop further contact.
- Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) – Overhauled the bankruptcy code in 2005, making it harder to file Chapter 7 and wipe out debts. But it kept important consumer protections in place.
- Kokken v. Guardians of Liberty (1958) – This Supreme Court case established that debtors can’t be jailed solely for inability to pay a debt, as that would constitute unconstitutional imprisonment for a debt.
- Sniadach v. Family Finance Corp (1969) – Landmark decision holding that garnishment of wages requires due process protections, like notice and opportunity to be heard.
- Bankruptcy Code Exemptions – Federal laws allowing bankruptcy filers to exempt certain property from the bankruptcy estate, like homes, cars, tools of the trade, etc.
There are also countless state laws governing things like:
- Wage garnishment limits and exemptions
- Asset exemptions (wildcard, household goods, tools, etc.)
- Statute of limitations on judgments
- Homestead exemptions protecting home equity
So it’s a complex web of federal and state laws dictating what creditors can and can’t do, as well as what protections debtors have. An experienced attorney is crucial to navigate it all properly.
If you truly have no income or assets to collect against (known as being “judgment proof”), you may be able to assert certain defenses to limit the judgment’s impact, such as:
- Lack of Assets Defense – If you can prove you have no non-exempt assets, creditors may be unable to collect through seizure. Though they could still garnish future wages.
- Inability to Pay Defense – You can argue you don’t have the means to pay the judgment based on your income, expenses, and exemption amounts. The court may then order an affordable payment plan.
- Statute of Limitations Defense – In many states, creditors only have a limited time (usually 5-10 years) to enforce a judgment before it expires. So you may be able to wait it out.
- Bankruptcy Discharge – As discussed, bankruptcy may allow you to fully discharge the debt if you qualify and it’s not an exempt type of debt.
- Exemption Claims – Carefully reviewing all available federal and state exemptions to maximize what income and assets are protected.
The key is being proactive, documenting your financial situation thoroughly, and asserting all possible defenses. Simply ignoring it gives the creditor a free pass to pursue aggressive collections.
When facing a judgment you can’t afford to pay, there are pros and cons to each potential option for dealing with it:
Bankruptcy
- Pro: Allows you to discharge (wipe out) eligible debts for a fresh start
- Con: Severely damages your credit for 7-10 years, making it hard to borrow
- Con: Not all debts are dischargeable (taxes, student loans, child support, etc.)
Negotiating a Settlement
- Pro: Allows you to settle for a lesser lump sum you can actually afford
- Pro: Settles the debt once and for all with no further collections
- Con: Creditor has to agree, and may demand more than you can pay
- Con: If they violate the deal, you may have no recourse
Requesting a Payment Plan
- Pro: Court can set an affordable payment schedule based on your finances
- Pro: Avoids more aggressive garnishment or seizure if you make payments
- Con: Debt isn’t settled and will accrue interest over the repayment period
- Con: Potential penalties if you miss any of the court-ordered payments
Claiming Exemptions
- Pro: Allows you to protect certain income and assets from collections
- Pro: Maximizes what you’re able to keep to maintain your livelihood
- Con: Exemption amounts are limited and may not fully solve the issue
- Con: Requires carefully reviewing all federal/state exemption laws
Appealing the Judgment
- Pro: If successful, can get the judgment overturned or reduced
- Pro: Potential to avoid having to pay anything if you win on appeal
- Con: Very difficult grounds to meet for a successful appeal
- Con: Often requires paying an appeals bond and hiring a lawyer