Should I File Bankruptcy Even If I’m Judgment Proof?
Under Massachusetts law, certain assets and sources of income are entirely protected and cannot be taken by your creditors. For example, pursuant to G.L. c. 235, § 34A, income from your 401(k) is fully protected and cannot be garnished. There are similar exemptions for many other assets and sources of income. If yours are fully protected, then you are considered “judgment proof” because even if a creditor sues you and obtains a judgment, they have no ability to collect anything from you involuntarily.
You may have recently heard the story of an elderly man who was jailed for contempt of court for failing to pay a small claims judgment from his retirement income. It was on the front page of the Boston Globe because the judge’s actions in this case were so egregious. Not only was the result a travesty of justice, but it was based upon the judge’s consideration of the man’s entirely exempt retirement income. Hopefully, this will never happen again.
If you are being hounded with debt collection calls and/or letters, then you may be contemplating a bankruptcy filing. However, if you are judgment proof, a bankruptcy filing may not be necessary. In this situation, a decision to file (or not file) should be made only after speaking with an experienced bankruptcy attorney regarding your circumstances and goals. Often, many people still choose to file a bankruptcy despite their judgment proof status for various reasons.
For instance, even if you are judgment proof now, that does not necessarily mean that you will be forever. If your judgment proof status is only temporary, it may not be wise to delay filing.
Also, if you plan on needing credit in the future, a bankruptcy filing may be the best method to rebuild your credit score as quickly as possible.
If a probate may be needed for you, then creditors can file claims and receive payment for outstanding bills or judgments through the probate process.
Finally, there is something to be said for the peace of mind that a bankruptcy discharge provides. It ensures that you won’t receive any further collection calls or notices of lawsuits, regardless of whether your circumstances change in the future. Under Massachusetts law you can request that collection calls and letters stop, but, without filing bankruptcy, this request would not stop lawsuits from being filed.
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Culik Law is a Massachusetts Attorney / Law Firm. The posts on Culik Law’s blog are not intended as legal advice. If you have questions about your particular situation, CONTACT CULIK LAW for a Free Consultation.