There is a ton of online information detailing all the necessary steps to collect an outstanding money judgment. Follow those steps to the letter and your chances of collecting are pretty good. But ‘pretty good’ does it mean guaranteed. You could do everything right and still not collect your judgment. You could dot every ‘i’ and cross every ‘t’ and still never collect a dime.

Unfortunately, it is possible because some debtors are simply judgment-proof. Others may not be judgment-proof but quite willing to declare bankruptcy in order to avoid paying. Both scenarios just about kill every effort you might make to collect.

The Judgment-Proof Debtor

The judgment-proof debtor is a judgment creditor’s kryptonite. If you are not sure why, it is all in the name. Being judgment-proof indicates that a debtor’s financial circumstances are not conducive to collecting. They may never be conducive.

Here is what qualifies a debtor as being judgment-proof:

• He is either unemployed or earns wages too low to garnish
• He has no cash assets that could be levied
• He has no real property that the creditor can attach liens to
• He has no non-exempt assets that could be subject to writs of execution
• He has no reasonable prospects for better financial circumstances in the future

Judgment Collectors, a Utah collection agency based in Salt Lake City, says encountering a judgment-proof debtor is a judgment creditor’s worst nightmare. So much so that it is often worthwhile to learn about a potential defendant’s financial status before beginning legal proceedings.

Circumstances Don’t Always Last Forever

Judgment Collectors are quick to point out that being judgment-proof is not always permanent. Circumstances can and do change. Years after losing a civil court case, a judgment debtor could land a better paying job. He could receive an inheritance from a loved one. All sorts of things could change his circumstances enough to allow collection efforts to begin.

For this reason, Judgment Collectors recommends never closing the case on an outstanding judgment until it reaches its statute of limitations. Creditors can do themselves a huge favor by checking up on the judgment-proof debtor every now and again, just to see if anything has changed.

The Bankrupt Debtor

A bankrupt debtor can sometimes be easier to collect from than his judgment-proof counterpart, but not by much. The big problem with bankruptcy is that the states implement an Automatic Stay on all collection efforts the minute a bankruptcy is entered in court. Once an Automatic Stay kicks in, all collection efforts must immediately cease.

It is also worth noting that money judgments often trigger bankruptcies. Think of it this way: a judgment debtor suddenly facing an enormous debt he cannot pay will look for a way out. Sometimes it takes only the mere suggestion of bankruptcy to point a debtor in that direction. He sees bankruptcy as a way to bypass the judgment and save whatever finances he has left.

Not Always Out of Luck

Judgment creditors are not always out of luck when debtors declare bankruptcy. At the very least, creditors should inform the court of their financial interests in debtor property. It’s then up to the court to decide who gets paid, how payments are made, and in what order they are applied. It is still possible that a creditor could get at least something out of a bankruptcy procedure.

Unfortunately, judgment creditors are often left out in the cold by judgment-proof debtors and bankruptcy proceedings. They can do everything right and still not collect. It’s something to think about before going to civil court in search of a monetary award.