If you sue someone and they can’t pay, the court gives you a judgment but leaves collection entirely up to you. A judgment is a legal declaration that the defendant owes you money; it is not a check, and no court officer will chase the money down on your behalf. If the defendant has no reachable income or assets, you’re left with what lawyers sometimes call a paper judgment. That doesn’t mean the money is permanently lost. Judgments stay enforceable for years, keep accruing interest, and a debtor’s finances can change. Your realistic options run from garnishing wages and levying bank accounts to recording a property lien, negotiating a reduced lump sum, selling the judgment to a buyer at a discount, or waiting the debtor out.
Check for Insurance Before Anything Else
Before you treat the defendant’s personal finances as the whole story, find out whether an insurance policy covers the claim. This is the single most overlooked step, and it can make the defendant’s bank balance irrelevant. Auto liability insurance typically pays judgments from car accidents up to the policy limits. Homeowners’ and renters’ policies often cover injuries that happened on the insured’s property. Commercial liability policies cover many business-related claims. When coverage applies, the insurer pays and you skip the collection process entirely.
Coverage has real limits. Contract disputes, unpaid loans, and intentional misconduct are generally not covered by any liability policy. But for negligence claims — car crashes, slip-and-falls, professional errors — insurance should be the first thing you check, not the last.
What the Judgment Actually Gets You
The judgment is the legal foundation for everything else. It fixes the exact amount owed, including original damages, court costs, and sometimes attorney fees. Without it, you have no authority to garnish wages, levy accounts, or place liens.
Once entered, the judgment starts accruing interest. Federal judgments carry a statutory rate tied to Treasury yields and compound annually.1Office of the Law Revision Counsel. 28 USC 1961 – Interest on Judgments State courts set their own post-judgment rates. On a $50,000 judgment, even a modest rate adds thousands over a few years, which matters when the debtor can’t pay now but might later.
Finding Out Whether the Debtor Has Anything
Before spending more money chasing a judgment, figure out whether anything is there to chase. Informal checks are free: public property records, business filings, social media that hints at income or expensive purchases.
Once you have a judgment, stronger tools open up. Most states allow a debtor’s examination, a court-ordered proceeding where the debtor appears and answers questions under oath about income, bank accounts, real estate, vehicles, and other property. You can also serve written interrogatories or demand documents. Lying is perjury, which gives even an evasive debtor a reason to tell the truth.
If the debtor has moved or switched jobs, professional skip-tracing services can locate them using credit bureau data, public records, vehicle registrations, and utility records. You need to know where someone works to garnish wages, and where they bank to levy an account. Collection without that information is mostly guesswork.
Tools for Collecting the Money
The court does not enforce your judgment on its own. As the judgment creditor, you have to pick the tool and start the process. Each one has its own filing requirements and its own limits.
Wage Garnishment
A wage garnishment order tells the debtor’s employer to withhold part of each paycheck and send it to you. Federal law caps garnishment at the lesser of 25% of disposable earnings or the amount by which weekly earnings exceed 30 times the federal minimum wage, which protects $217.50 per week at the current $7.25 rate.2Office of the Law Revision Counsel. 15 US Code 1673 – Restriction on Garnishment Some states cap it lower. Garnishment is steady once in place, but it only works on a debtor with regular employment, and a large judgment at 25% per paycheck can take years to satisfy.
Bank Levy
A bank levy freezes the debtor’s account and sweeps whatever non-exempt funds happen to be there when the bank receives the order. That’s the catch: a levy is a snapshot. If the debtor just paid rent and the account holds $43, that’s what you get. You can levy again later, but each new attempt means a new court order, new service, and more fees.
Property Lien
Recording your judgment with the county recorder’s office creates a lien against the debtor’s real estate. The lien doesn’t force a sale or produce immediate cash. It blocks the debtor from selling or refinancing the property without paying you first. If and when the debtor sells, your lien gets paid out of the proceeds. This is a long game. Liens generally last anywhere from 5 to 20 years depending on the state and can usually be renewed. In states with generous homestead exemptions, the lien may not reach the debtor’s primary residence at all.
Writ of Execution
A writ of execution directs a sheriff or marshal to seize non-exempt personal property — vehicles, equipment, jewelry, electronics — and sell it at public auction, with proceeds going to your judgment.3Cornell Law School Legal Information Institute. Federal Rules of Civil Procedure Rule 69 – Execution In practice it’s less useful than it sounds. Used furniture and older cars bring little at auction, and most states exempt a certain value of car, basic household goods, and tools of the trade. Writs tend to work best against debtors who own business equipment or inventory with real resale value.
When the Debtor Is “Judgment Proof”
A debtor is judgment proof when every dollar they earn and every asset they own falls under a legal exemption. The debt still exists; the law has just put the pieces of their life you’d otherwise seize out of your reach, to keep debtors from being pushed into destitution.
Federal law shields Social Security benefits, Supplemental Security Income, veterans’ benefits, disability payments, and most retirement account funds from garnishment by ordinary judgment creditors.4Social Security Administration. Can My Social Security Benefits Be Garnished or Levied There are narrow carve-outs for the IRS, child support, and alimony,5Internal Revenue Service. Social Security Benefits Eligible for the Federal Payment Levy Program but none of them help you if you hold an ordinary civil judgment for something like breach of contract or property damage.
Many states also protect some or all of the equity in a debtor’s primary residence through a homestead exemption. The range runs from no protection at all to full value regardless of worth. If the debtor’s only significant asset is a home and the equity falls within the exemption, a lien won’t produce an immediate recovery.
Judgment proof today doesn’t mean judgment proof forever. People take new jobs, inherit money, buy property, and start businesses. Your judgment stays enforceable, interest keeps compounding, and periodically re-checking the debtor’s situation through public records or a fresh debtor’s exam can turn up assets that weren’t there before.
Negotiating a Settlement or Payment Plan
When collection looks hard, many creditors do better by negotiating directly with the debtor than by chasing assets through the courts. A debtor who can’t pay $30,000 at once might agree to $15,000 as a lump sum, or $500 a month over several years. For the debtor, settling makes the threat of future garnishments and liens go away. For you, it avoids the cost and uncertainty of enforcement. Fifty cents on the dollar today can be worth more than the theoretical right to collect 100% someday from someone who has nothing.
If you reach a deal, put the terms in writing: the amount, the payment schedule, what happens if a payment is late (including any grace period), and a clear statement that you accept the agreed amount as full satisfaction of the judgment. Without that written agreement, fights over whether the judgment was really resolved can drag on for years.
Selling the Judgment
If you don’t want to handle collection yourself, you can sell the judgment. Specialized companies and investors buy court judgments at a discount, pay you cash, and take over all enforcement. You sign an assignment of judgment, the buyer files it with the court, and you’re done.
The discount is steep. Most buyers pay between 1% and 25% of face value depending on how collectible the debt looks. A $100,000 judgment against a debtor with a steady job and home equity might fetch $20,000 to $25,000. The same judgment against an unemployed debtor with no assets might bring $1,000 to $5,000. Selling makes sense when you’ve run out of patience or budget, but you leave a lot on the table.
If the Debtor Is Hiding Assets
Some debtors don’t just happen to have nothing. They move things out of reach: transferring a house to a relative for a dollar, draining accounts into a spouse’s name, “selling” a business to a friend right as a judgment lands. Every state has laws, most based on the Uniform Voidable Transactions Act, that let creditors challenge these transfers and claw the assets back.
Courts look at warning signs like whether the transfer went to a family member, whether the debtor kept using the property afterward, whether the transfer happened right after a lawsuit was filed or threatened, and whether the debtor received anything close to fair market value. A transfer doesn’t require outright lying to be voidable. If the debtor was insolvent at the time or became insolvent because of the transfer, a court can reverse it even without proof of intent to cheat creditors. Pursuing a fraudulent transfer claim means filing a separate action, which adds time and cost, but when a debtor who clearly had assets suddenly appears to have none, it’s often the only path to recovery.
If the Debtor Files Bankruptcy
A bankruptcy filing stops collection the moment the petition is filed. An automatic stay halts all garnishments, levies, lawsuits, and collection calls.6Office of the Law Revision Counsel. 11 US Code 362 – Automatic Stay Violating the stay can trigger sanctions, so stop everything the moment you learn of the filing.
The bigger question is whether the bankruptcy wipes out your judgment permanently. If the court grants the debtor a discharge, it voids your judgment as a personal liability and you can never collect on it again.7Office of the Law Revision Counsel. 11 US Code 524 – Effect of Discharge Most ordinary debts — contract disputes, credit card balances, medical bills, negligence claims — are dischargeable.
Some debts survive bankruptcy:8United States Courts. Discharge in Bankruptcy – Bankruptcy Basics
- Child support and alimony are never dischargeable.
- Recent income tax debts, and taxes tied to a fraudulent return or evasion, generally survive.
- Debts for money obtained by fraud or false pretenses can be excepted from discharge.
- Judgments for willful and malicious injury to a person or property, such as assault or deliberate property destruction, can be excepted.
- Judgments for death or personal injury caused by driving under the influence survive.
For the fraud and willful-injury categories, the court won’t act on its own. You have to file a motion in the bankruptcy case asking that the debt be declared non-dischargeable, and there’s a deadline. Miss it and the debt gets discharged by default.
Judgments Expire if You Don’t Renew Them
Every judgment has an expiration date. Depending on the state, a civil money judgment stays enforceable for 5 to 20 years. Once it lapses, you lose the legal right to collect. Most states let you renew before expiration by filing a motion or affidavit and paying a fee, and some require serving the debtor with notice. Renewal extends the judgment for another full term, and many jurisdictions allow more than one renewal.
You have to renew before the deadline, not after. Missing it by a day can permanently kill the judgment. If you’re holding a judgment against someone who can’t currently pay, calendar the expiration date well in advance and file early enough to absorb any processing delay.
Tax Consequences if You Eventually Forgive the Debt
If you give up and formally cancel the debt, the debtor can face a tax bill. A creditor that cancels $600 or more of debt must issue Form 1099-C reporting the canceled amount, and the debtor generally has to report that amount as income.9Internal Revenue Service. Form 1099-C There is a key exception for insolvent debtors: if their total liabilities exceeded the fair market value of their total assets right before the cancellation, they can exclude the canceled amount from income up to the amount of that insolvency, using Form 982.10Internal Revenue Service. Publication 4681 – Canceled Debts, Foreclosures, Repossessions, and Abandonments The debtors who couldn’t pay you because they were broke often owe nothing to the IRS on the forgiven amount either.