Civil court is one option for going after a debtor who doesn’t pay his bills. Suing the debtor could result in a money judgment, a legal decision recognizing the legitimacy of the debt and the debtor’s obligation to pay it. But what if the debtor truly cannot afford to pay? Then what?
It is in the best interests of the plaintiff to determine the realistic chances of being paid before actually going to court. If a plaintiff and his attorney choose to press forward, it is important for the plaintiff to go in with reasonable expectations. A lack of financial resources could delay payment even after the plaintiff wins his case.
The Debtor May Appeal
Civil court affords debtors at least some level of protection. For example, a judgment can always be appealed. Whether or not an appeal is successful is another matter. And in fact, it’s awfully tough to overturn a money judgment unless the debtor can provide compelling proof that the court erred.
That notwithstanding, plaintiffs (a.k.a., judgment creditors) and collection agencies still need to be prepared for a potential appeal for the simple fact that collection efforts are delayed accordingly. For instance, some states require a 30-day waiting period during which time the defendant can appeal. All collection efforts are on hold for those 30 days, as well as any time granted for an appeal to be heard once filed
Appeals can be used as a delay tactic to help the debtor rearrange finances or hide assets. That does not mean it will be. It simply means that appealing is one of the things a debtor might do if he cannot afford to pay. There are other things as well.
He Might Request Negotiations
Another option for a debtor who cannot afford to pay is to request negotiations. He sends his attorney to negotiate a deal with the creditor’s attorney. The idea is to reduce the total amount owed in exchange for immediate payment.
Settling for less might be more amenable than taking one’s chances on collection and ultimately getting nothing at all. But creditors do have their own ‘ace up the sleeve’, so to speak. Rather than agreeing to a lesser amount in exchange for immediate payment, they can offer a workable payment plan through which the debtor pays the entire amount over time.
He Might Request an Exemption
If the creditor attempts to pursue wage or bank account garnishment, a debtor with limited resources could petition the court for an exemption. This is to say that he would claim that all his limited income and savings are necessary to meet basic necessities.
It is a wise strategy given that most states limit wage and bank account garnishment to disposable income only. Creditors are only allowed to seize a portion of that income. Any money needed for basic necessities is untouchable.
He Might File for Bankruptcy
A worst-case scenario for any judgment creditor is the debtor filing for bankruptcy. Unfortunately, most states allow the discharge of certain types of money judgments through bankruptcy proceedings. Exceptions tend to be related to judgments involving child support, alimony, and tax debts. A money judgment in a debt collection case would almost certainly be discharged by bankruptcy.
Winning a money judgment against a party with enough financial resources to make good on the debt is one thing. But winning a judgment against someone who has little income and no assets is an entirely separate matter. A judgment debtor who truly can’t afford to pay might not even be worth suing.
