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What happens if I do not have the money to pay the debt or judgment?

Produced by Mariah Jennings-Rampsi, South Coastal Counties Legal Services, with funding from American College of Bankruptcy Foundation
Reviewed December 2019

Always go to court

If you cannot pay the debt, tell the creditor. Keep reminding the creditor during your case. If you are collection proof tell the creditor. Even if you do not have the money to pay the debt, always go to court when you are told to go.

A creditor or debt collector can win a lawsuit against you even if you are penniless. The lawsuit is not based on whether you can pay—it is based on whether you owe the specific debt amount to that particular plaintiff.  Even if you have no money, the court can decide:

  1. the creditor has won the lawsuit, and,
  2. you still owe that sum of money to that person or company.

If you lose your case

The judge has already decided that you owe money to the plaintiff.  The judge has not decided how you are going to pay the plaintiff back. The creditor has to follow a second step to collect the money you owe. 

The creditor may have asked for an “execution” at the end of your case. If they get an execution from the judge, they can “levy on the execution.” This means it is legal for them to take your property. They will hire a sheriff or a constable. The sheriff or constable will bring you a copy of the execution and take your car or put a lien on your house.

If the creditor wants you to pay them money, they can take you back to court on a Supplemental Process to “garnish your wages.” They can take money out of your paycheck before you get paid. 

If you are collection proof, the creditor cannot take any of your assets or income even though they have a judgment against you.  If some of your stuff or some of your income is protected by exemptions, you need to know what and how much so that you can make sure that it is not taken from you.  If you know what exemptions protect your income or things, you can tell the judge and the judge will not order you to pay from those assets and income.

Agreements when you do not have money to pay the debt:

The plaintiff and the judge will probably ask you again and again if you can pay anything towards the debt. They will also ask if you are willing to enter into a repayment plan.  A repayment plan is an agreement with the creditor that you will pay back the debt by paying a set amount every month. The repayment plan may be part of a court order called an “agreement for judgment.”

If the agreement is made into a court order and you do not pay back the amount you have agreed to pay, you could be in violation of the court order.

Only agree to a repayment plan if you really agree. If you do not agree with the amount stated, or you cannot pay back any amount every month, do not agree to a repayment plan.

If you have income that is collection proof a court cannot order you to pay back the debt from that income. But if you agree in a repayment plan to pay a sum out of the protected income, the court can make you pay from your protected income.

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