If someone sues you and you have no money, the lawsuit still goes forward, the court can still enter a judgment against you, and the amount owed is still legally real. What changes is collection. Federal and state law protect certain income and property from being seized, so a creditor holding a judgment against someone with only exempt income and basic belongings often cannot take anything, even though the debt sits on the books and can be collected later if your finances improve.
Being broke is not a reason the court will dismiss a case, and it is not a reason to ignore the papers. The practical questions are what to do when you’re served, what a creditor can actually reach, and how long the judgment can follow you.
Respond to the Lawsuit Even If You Have Nothing
When you’re served with a summons and complaint, you have a deadline to file a written response called an answer. In federal court, that deadline is 21 days from the date of service.1United States Courts. Federal Rules of Civil Procedure – Rule 12 State courts set their own deadlines, usually between 20 and 30 days.
Skipping the response because you think you have nothing to lose is one of the costliest moves you can make. If you don’t answer, the plaintiff can ask the court for a default judgment and win the full amount claimed without ever having to prove the case. You lose any chance to challenge the amount, dispute the facts, or raise defenses like the statute of limitations or the plaintiff’s lack of standing to sue. Filing an answer does not require a lawyer, and the filing fee is often waived if your income is low enough.
If a Default Judgment Was Already Entered
A default judgment is not automatically permanent. Under federal procedural rules, you can file a motion to set it aside based on mistake, excusable neglect, newly discovered evidence, fraud by the other side, or a showing that the court lacked proper authority over you. For most of these grounds, you have to file within one year of the judgment.2United States Court of International Trade. Federal Rules of Civil Procedure – Rule 60 State courts have similar procedures with their own deadlines and grounds. You generally also need to show you have a legitimate defense to the underlying claim, not just a good excuse for missing the deadline.
What “Judgment Proof” Really Means
Being judgment proof is a description of your current financial situation, not a legal status the court assigns. It means that everything you earn and own right now falls within categories a creditor cannot legally seize. The judgment is still valid. The debt is still owed. The creditor just has no lawful way to collect.
Someone living entirely on Social Security or SSI, renting their home, and owning nothing beyond basic personal belongings is the clearest example. A creditor can hold that judgment, try to enforce it, and come up with nothing every time. The catch is that the state can change overnight. Inheriting money, getting a better job, or receiving a settlement can turn a dormant judgment into an active collection problem, which is why creditors often sit on judgments for years.
Income and Property Creditors Cannot Reach
Social Security and Other Federal Benefits
Social Security has some of the strongest protections in federal law. Under 42 U.S.C. ยง 407, Social Security payments cannot be garnished, levied, or attached by private creditors.3Office of the Law Revision Counsel. United States Code Title 42 – Section 407 The same protection covers Supplemental Security Income, veterans’ benefits, federal railroad retirement, Civil Service Retirement, and Federal Employee Retirement payments.4National Credit Union Administration. Garnishment of Accounts Containing Federal Benefit Payments
When those benefits are direct-deposited, the protection follows them into the bank. Federal regulation requires your bank to automatically calculate a protected amount equal to two months of deposited benefits when a garnishment order comes in, and you keep full access to that amount without filing anything.5eCFR. Title 31 CFR Part 212 – Garnishment of Accounts Containing Federal Benefit Payments
Retirement Accounts
Money held in employer-sponsored retirement plans like 401(k)s and traditional pensions is broadly protected by ERISA, with no dollar cap, as long as it stays in the plan.6Office of the Law Revision Counsel. United States Code Title 29 – Section 1056 Form and Payment of Benefits Traditional and Roth IRAs are not covered by ERISA because they’re individual rather than employer-sponsored, so their protection outside bankruptcy depends on state law. In bankruptcy, federal law shields IRA funds up to a periodically adjusted cap that currently exceeds $1.5 million. Once you withdraw the money, it becomes ordinary cash in your account and loses the shield.
Home Equity and Personal Property
Most states let you protect some equity in your primary residence through a homestead exemption. The limits vary widely, from caps as low as $20,000 in some states to no cap at all in a few.7Legal Information Institute. Homestead Exemption States generally also exempt a vehicle up to a certain value, tools you need for your job, and basic household goods. The specific dollar figures depend on where you live, so your state’s exemption schedule is worth looking up directly.
Debts That Punch Through the Protections
Exemptions stop most private creditors, but not everyone. The IRS can levy up to 15% of your Social Security benefits for unpaid federal taxes, and that levy applies regardless of how little you receive.8Internal Revenue Service. Social Security Benefits Eligible for the Federal Payment Levy Program SSI and disability payments to children are excluded from that program.
Child support and alimony also bypass the usual rules. A court can order wage garnishment well above the 25% cap that applies to consumer debts and can reach into retirement accounts through a qualified domestic relations order.6Office of the Law Revision Counsel. United States Code Title 29 – Section 1056 Form and Payment of Benefits Secured debts work differently again. If you pledged your car or home as collateral, the lender can repossess or foreclose on that specific property no matter what exemption would otherwise apply, because exemptions only block unsecured creditors.
How Creditors Try to Collect
Wage Garnishment
If you have a job, a judgment creditor can get a court order requiring your employer to withhold a portion of your pay. Federal law caps the garnishment at the lesser of 25% of your disposable earnings or the amount by which your weekly disposable earnings exceed 30 times the federal minimum wage, which currently works out to $217.50 per week.9Office of the Law Revision Counsel. United States Code Title 15 – Section 1673 If you earn near minimum wage, the 30-times rule usually protects more of your check than the 25% rule does. Several states cap garnishment lower than the federal floor.
Bank Account Levies
A creditor can also get an order freezing your bank account and turning over the funds. Before releasing anything, the bank must identify protected federal benefit deposits and set aside the two-month protected amount.5eCFR. Title 31 CFR Part 212 – Garnishment of Accounts Containing Federal Benefit Payments If your account holds only exempt funds, the levy should come up empty. If you’ve mixed exempt deposits with other money, tracing which dollars are protected gets harder, and the whole balance can be frozen temporarily while that gets sorted out.
Debtor’s Examinations
After winning, a creditor can also ask the court to order you to appear and answer questions under oath about your income, accounts, property, and employment. The point is to find out whether you actually have anything worth going after. If you’re properly served with the order and you don’t show up, the judge can hold you in contempt and issue a bench warrant. Appearing and truthfully reporting that you have nothing to take is far better than not appearing at all.
Judgments Last a Long Time
A judgment is not a short-term problem. Depending on the state, judgments remain enforceable for 7 to 20 years, and most states let creditors renew them before they expire. A judgment entered today can still be live a decade from now.
During that window, the creditor can record a lien against any real property you own in the county where the judgment is filed. That lien attaches to the property and blocks you from selling or refinancing without paying the judgment off first. If you acquire property later, the lien can attach then. An inheritance, a settlement, or a better-paying job can all turn a quiet judgment into an active collection case.
Civil judgments no longer appear on the standard credit reports from the three major bureaus. Bankruptcy is now the only public record routinely reported there. Judgments still sit in the public court record, however, and landlords, lenders, and employers who run background checks can find them.
Settling the Judgment for Less
Creditors with judgments against people who have little to attach often prefer a partial payment now over nothing for years. That gives you real room to negotiate. A lump sum that is a fraction of the total can sometimes resolve the whole debt, because the alternative for the creditor is continuing to spend on collection with nothing coming in.
Get any agreement in writing before you pay, and ask for a formal satisfaction of judgment to be filed with the court once your payment clears. Without that filing, the judgment stays on the court record as unsatisfied. If the debt has been sold to a collection agency, confirm you’re negotiating with whoever currently owns it. A debt-collection attorney can sometimes get better terms, but you can also approach the creditor directly.
Bankruptcy
Filing for bankruptcy triggers an automatic stay that immediately halts most collection activity, including pending lawsuits, wage garnishments, and bank levies.10Office of the Law Revision Counsel. United States Code Title 11 – Section 362 Chapter 7 can discharge many civil judgments outright, including those based on credit card debt, medical bills, and personal loans.
Some debts are not dischargeable. Federal law carves out child support and alimony, most tax debts, student loans (absent undue hardship), debts arising from fraud or embezzlement, and judgments for death or injury caused by drunk driving.11Office of the Law Revision Counsel. United States Code Title 11 – Section 523 Exceptions to Discharge Creditors can also ask the bankruptcy court to find specific debts nondischargeable when the underlying conduct involved willful harm or deception. To qualify for Chapter 7, your income generally has to fall below your state’s median for a household of your size; if it doesn’t, Chapter 13 restructures debt into a repayment plan instead.
Getting Help Without Paying for a Lawyer
You don’t have to handle a lawsuit alone just because you can’t afford counsel. The Legal Services Corporation funds 130 nonprofit legal aid organizations across every state and U.S. territory that provide free civil help to people with low incomes, and you can find a local office through lsc.gov or LawHelp.org.12Legal Services Corporation. I Need Legal Help Many courts run self-help centers that explain procedures and help with forms, and local bar associations often operate pro bono referral programs. Getting even limited professional guidance early, especially before a default judgment is entered, often changes the outcome.