I Cant Afford To Pay My Creditors, Am I Judgement Proof?

Struggling to Pay Creditors: Understanding the Concept of Being ‘Judgement Proof’

Finding yourself neck-deep in debt can be a harrowing experience. The inability to pay off debts, coupled with the constant badgering from creditors, can lead to a stressful life. But what happens when you simply can’t afford to pay your creditors? Are you immune to legal actions? This is where the concept of being ‘Judgement Proof’ comes into play.

Delving into the ‘Judgement Proof’ Phenomenon

Judgement Proof‘ is a term that signifies a debtor’s inability to fulfill their debt obligations due to a lack of financial resources. When a debtor is unable to pay their bills or react to collection actions, creditors can resort to legal proceedings. They can obtain a court order against the debtor, granting a judgement in their favor. The onus of enforcing this judgement lies on the creditors, who can seize assets or garnish wages to recover the debt.

However, to ensure a debtor’s basic standard of living, the government has mandated certain exemptions to these judgements. If a debtor’s assets and income fall within these exemptions, creditors can’t enforce the judgement, rendering the debtor ‘judgement proof’.

Understanding Exempt and Protected Assets

Different types of assets and income are exempted from these judgements. Here are some examples:

 

Income Assistance: Various jurisdictions have laws protecting income assistance from garnishment. For instance, under the Employment and Assistance Act in British Columbia (B.C), any provincial income assistance is exempt from garnishment.

Federal Income Benefits: Certain federal income benefits like Canada Pension Plan (CPP), Old Age Security (OAS), and Guaranteed Income Support (GIS), and Employment Insurance (EI) payments are also exempt from garnishment by non-governmental creditors. However, government agencies can garnish these payments for outstanding debts like income tax or child support.

Personal Property: Each jurisdiction has specific legislation determining which types of personal property are exempt from seizure. In B.C, this is governed by the Court Enforcement Act.

Jointly Owned Assets: Assets co-owned between you and another person are exempt from seizure unless both are subject to the judgement.

 

The Perils of Bank Deposits

Regardless of the source of your income, once it enters your bank account, it loses its judgement proof status. In a worst-case scenario, if you owe money to your primary banking institution, they could potentially freeze your accounts and use your account balances to recover your debts. Therefore, it’s advisable to have a bank account with a financial institution that you have no credit dealings with.

How Long Does the ‘Judgement Proof’ Status Last?

Your ‘judgement proof’ status will last as long as your financial status remains unaltered. However, even if you are judgement proof, the debt and the judgement will not disappear. If your financial situation changes and you acquire income or property that is not judgement proof, your creditors can enforce judgement against your property.

The Persistence of Debt

In B.C, the Limitation Act permits unsecured creditors two years from the time of the last payment to initiate legal action against a debtor. But this does not mean the debt expires. Your creditors can still continue with regular collection activities such as sending written notices, contacting you via phone, or reporting your delinquency to the credit bureaus.

Collection Activity and Debtors’ Rights

Being judgement proof protects you from creditors enforcing or obtaining a court judgement. However, it does not prevent them from engaging in other collection activities. Therefore, understanding your rights as a debtor is crucial.

Debt collectors can:

 

  • Contact you within specific hours
  • Contact your acquaintances to request your contact information

 

However, they cannot:

 

  • Suggest to your acquaintances that they should pay your debts;
  • Use threatening, intimidating language;
  • Apply unreasonable pressure on you to repay the debt;
  • Misrepresent the situation or give false information;
  • Call you on your mobile, unless you’ve provided that number as a way to reach you.

 

Conquering Your Debt

While being judgement proof may offer temporary relief from wage garnishment or asset seizure, it’s not a permanent solution. The only way to permanently end debt stress is to settle with your creditors. A Licensed Insolvency Trustee can review your financial situation and discuss debt solutions such as personal bankruptcy or Consumer Proposal.

Conclusion

The idea of being judgement proof can seem like a lifeline when you’re drowning in debt. But it’s only a temporary solution. If you’re struggling with debt and can’t afford to pay your creditors, consider seeking help from a professional. Remember, there’s no shame in seeking help. The first step towards resolving your financial problems is to acknowledge them and seek solutions.

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