Creditors will find out what you own through a legal proceeding called a citation to discover assets. When a creditor serves you with citation papers, you must go to court to answer questions about your property. You may be required to bring certain documents with you such as tax returns, check registers, and pay stubs.
If you do not have income or property that your creditor can take that means you are a collection proof debtor, and your creditor may not immediately be able to collect anything from you.
Remember, you can't go to jail just because you owe money on a bill or because you cannot pay a judgment. The United States outlawed debtor's prison 200 years ago.
A collection proof debtor has more protection against creditors and collection agencies. A person is considered a collection proof debtor if they meet the following requirements:
- They have no income, their take-home pay from work is below $371.25 a week, or their income is from a protected source like public benefits, child support, or social security;
- If they own a home or any real estate, the value of its equity is below $15,000;
- If they have a car, its value is less than $2,400; and
- The value of their personal property is not more than $4,000.
A collection proof debtor is only protected against personal, family, or household debt. Examples of these debts are money that you owe from buying furniture or a car, medical bills, and credit card purchases. Business debts are not covered. Other debts not covered include child support, fines for parking or other code violations, and damages owed as a result of a car accident or property damage.
If you are a collection proof debtor, you can send a Collection proof debtor letter to creditors/collection agencies saying so to your creditor or collection agency. This will inform them of your situation.
If you are a collection proof debtor, a creditor may still sue you for the nonpayment of a debt owed. However, the creditor will be limited in their ability to collect on a court judgment against you.
Updated: January 2017