The Myth: “I Have Nothing, So Why Bother?”

Start with one number. In the places that track it, courts have resolved more than 70 percent of debt collection lawsuits with a default judgment for the plaintiff, according to a 2020 Pew Charitable Trusts study. A default judgment is what happens when the person sued doesn’t respond. Pew notes these judgments are issued without the court weighing the facts of the complaint. Nobody checks whether you’re the right person, whether the amount is right, or whether the debt is too old to sue over.

People skip responding for ordinary reasons: the papers are confusing, the plaintiff is a company they’ve never heard of, and a lawyer costs money they don’t have. If that’s you, it isn’t a character flaw. It’s a deadline problem, and it’s fixable.

Here’s what ignoring the lawsuit typically costs, according to the CFPB:

• Your defenses. If the debt is too old, isn’t yours, or the amount is wrong, the court generally won’t look into it unless you raise it. After a judgment, you may lose the ability to dispute the debt at all.
• Extra money owed. A judgment can add lawful interest, collection costs, and attorney fees to the balance.
• Stronger collection tools. Depending on your state and finances, that can mean garnished wages, a frozen bank account, or a lien on property.
• Your ability to undo it. A judgment is a court order and is hard to change afterward. The CFPB says you have a much better chance defending a case than waiting until a judgment exists.

Your deadline is printed in the summons. Across states it’s commonly somewhere around 20 to 30 days from the date you were served, and it varies. California, for example, gives 30 days, and its court self-help site explains that once a default is entered, the court won’t let you file an Answer and can decide the case without you. Dodging the process server doesn’t help either; the CFPB says a court may treat refusing service as ignoring a properly served lawsuit.

None of this requires you to have money today. That’s the trap. “Judgment proof” means a judgment can’t be collected right now. It doesn’t mean the judgment doesn’t exist.

What “Judgment Proof” Actually Means (and Doesn’t)

“Judgment proof” is a phrase, not a status a judge grants. It describes someone a creditor can’t currently collect from, for one of two reasons:

• Everything you have is legally protected. Your only income is Social Security, say, and you own nothing your state’s exemptions don’t cover. (“Exempt” means the law puts it off limits to most creditors.)
• You simply have nothing to take. No job, no savings, no property worth pursuing.

The word doing the heavy lifting is “currently.” Judgment-proof describes your finances today. It says nothing about whether you owe the debt, and it isn’t a defense to the lawsuit. A court won’t know about your situation unless you appear and tell it, and silence doesn’t count as telling.

To keep the rest of this straight, this article uses three states:

PROTECTED

Federally protected income, such as Social Security, that a private creditor generally can’t garnish. Safe from garnishment now, with exceptions.

DORMANT

A judgment exists, or could, but there’s nothing collectable today. This is the “judgment proof” reality.

ACTIVE THREAT

Income or assets a creditor can reach have appeared. Collection can resume.

You can move between states without anyone announcing it. A new job moves you from Dormant to Active Threat. So can a tax refund landing in your bank account, a small inheritance, or a settlement check.

Why respond if you’re Protected or Dormant?

Because the lawsuit and the collection are two separate questions. Responding is how you keep your defenses, put your situation on the record, and open the door to a resolution. The CFPB notes that if you do owe the debt, you may be able to work out a settlement, and that responding doesn’t mean you’re agreeing you owe it. Nobody can promise a particular outcome, but not responding hands the outcome to the plaintiff.

In practice, “saying so to the court” means your written response, or a hearing if there is one, can state that you have no income or assets a creditor can collect, or that your only income is protected. Where your court wants that statement varies, so ask a self-help center (see the free-response steps below). Court staff can explain procedure but can’t give legal advice.

The Dormant Judgment: Why It Can Come Back in 10 Years

A judgment is a court order saying you owe a specific amount. It doesn’t need you to have money on the day it’s entered. It only needs to stay enforceable, and that’s the part that surprises people.

How long it lasts

Enforcement periods are set by state law. A commonly cited range is roughly 5 to 20 years, with 10 years typical in many states, and many states let a creditor renew a judgment before it expires. Some states have tightened the rules for consumer debt. California, for example, generally lets money judgments run 10 years, but judgments on personal debts under $50,000 can be renewed only once, for five years, according to its court self-help site. Other states allow longer periods or repeated renewals, so check yours.

It grows while it waits

Judgments earn interest at a rate set by state law. Pew’s 2020 review found rates ranging from 1.5 percent a year in New Jersey to 12 percent in Massachusetts, with many states in between. As a purely illustrative example, a $4,000 judgment at 8 percent simple interest adds about $320 a year, or roughly $3,200 over ten years, before any fees or costs a court allows. California lists 5 percent for many consumer-debt judgments since 2023 and 10 percent for others.

Waiting is a strategy

A creditor doesn’t have to act right away. It can wait for a job, a tax refund, an inheritance, or savings, then use the tools a judgment provides. The CFPB lists garnishment, property liens, and frozen accounts among them. In many states a recorded judgment lien can reach property you own now or buy later in that county, so a judgment can matter years later if you buy a home.

Creditors can also ask the court to order you to answer questions about your finances under oath, often called a debtor’s examination. Being judgment-proof doesn’t excuse you from attending. It’s the place to say so, truthfully, and telling the court about protected income doesn’t make that income reachable.

What about jail?

Not for owing money. The CFPB is clear that a debt collector can’t have you arrested over an unpaid debt, and threatening arrest violates the federal Fair Debt Collection Practices Act. There’s a separate, narrower risk: if a court orders you to appear or provide information and you ignore that order, a judge may hold you in contempt and, the CFPB notes, may issue a warrant. That’s a consequence of defying the court, not of being poor. Go to what the court orders you to attend, even if all you say is that you have nothing to collect.

So the dormant judgment is the real cost of ignoring a lawsuit when you’re broke. And this is where a widely repeated half-truth causes trouble: you’ve probably heard that judgments don’t matter anymore because they’re off your credit report. Half of that is true.

Credit Report vs. Public Record: The Distinction Almost Nobody Gets Right

What changed on July 1, 2017

The change came from the National Consumer Assistance Plan, a 2015 initiative that followed a settlement between the three bureaus and more than 30 state attorneys general. One provision said public-record data could stay on a credit report only if it included the person’s name, address, and a Social Security number or date of birth, and was refreshed at least every 90 days. The standard took effect July 1, 2017.

The CFPB tracked the result in a sample of about five million credit records. Its February 2018 report found that civil judgments, formerly the most common public record on credit files, dropped off entirely once the standard took effect. Just before, about 6 percent of consumers in the sample had a civil judgment or tax lien on their credit record. Its December 2019 follow-up found that bankruptcies were the only type of public record still on these credit reports. So if you’re worried a debt judgment will show up at Equifax, Experian, or TransUnion, the CFPB’s data says it generally won’t, and one that did would be unusual and worth checking for an error.

What didn’t change

The 2017 standard governed what the bureaus carry. It didn’t erase a single court judgment. The case file and the judgment stay in the court’s records, with no built-in expiration date on the record itself, though the record can be updated to show a judgment was paid or set aside. Nobody needs a credit bureau to find it. Here’s who can, and how:

• Tenant and employment screening companies compile court records for landlords and employers. Under the Fair Credit Reporting Act, the CFPB explains, a civil judgment can generally be reported for seven years after entry, or until the debt’s statute of limitations expires if that is longer. That’s a limit on the report, not on the court record.
• Anyone can search the docket directly. A landlord, employer, or lender reading court records themselves generally isn’t bound by the time limits that govern screening companies. Some courts limit online access.
• Lenders and title companies check property records for recorded judgment liens, and mortgage lenders commonly want a lien resolved before closing.

In real life, that can complicate an apartment application, a job that involves handling money, or a mortgage, even with a clean credit report. It won’t always, since many landlords never search court records. But it’s why “it’s not on my credit report” is no reason to let a default happen. One more piece: the late payments and collection accounts that led to the lawsuit may still be on your credit reports, generally for up to seven years from the original delinquency.

A caution: the 2017 standard came out of a settlement-based reporting practice, not a law that erases judgments, and practices can change. Treat this as accurate for the date at the top of the page. And if a judgment is ever paid, make sure the court record shows it as satisfied.

Your Protected Income

Social Security, SSDI, and SSI

The legal basis is 42 U.S.C. § 407(a), which says money paid or payable under Social Security can’t be reached by execution, levy, attachment, garnishment, or other legal process. SSI is covered through 42 U.S.C. § 1383(d)(1), which applies the same rule. The exceptions, per the CFPB, are that Social Security and SSDI can sometimes be garnished for government debts such as back taxes or federal student loans, and for child or spousal support. SSI, being means-tested, is protected even from those.

Where the money sits matters

When a bank receives a garnishment order, federal rules require it to review your account and automatically protect two months’ worth of directly deposited federal benefits. Anything above that can be frozen or turned over. If your benefits arrive by check and you deposit them yourself, the automatic protection doesn’t apply, and you may have to go to court to show the money is exempt.

Other federal benefits

The CFPB’s list of federal payments protected when directly deposited also includes veterans’ benefits, civil service and federal retirement and disability benefits, servicemember pay, railroad retirement, and a few others. Each has its own rules and exceptions.

Unemployment benefits

Unemployment is different: the protection comes mainly from your state’s law, not a single federal rule like § 407. Many states shield these benefits from ordinary creditors, some require specific steps to claim the protection, and exceptions such as child support can apply. Check your state’s rules through LawHelp.org or legal aid.

Wages

Wages are only partly protected. Federal law caps ordinary garnishment at the lesser of 25 percent of disposable earnings or the amount by which weekly disposable earnings exceed 30 times the federal minimum wage, per the Department of Labor. At $7.25 an hour, that means nothing can be garnished for an ordinary consumer debt if weekly disposable earnings are $217.50 or less. Some states protect more.

This article doesn’t cover the exceptions in depth: federal debts, tax debts, child support, and alimony can reach income that a credit card company can’t, and state rules vary.

Protected doesn’t mean optional

Protected income doesn’t make the lawsuit optional. If a creditor wins by default and freezes your account, you’re the one who has to prove where the money came from, fast; the CFPB says to notify the court, the bank, and the creditor in writing right away. The CFPB also publishes a sample letter telling a collector your income is protected. It’s useful, but it goes to the collector and doesn’t replace answering the court.

How to Respond for Free, Without a Lawyer

You don’t need money or a lawyer to respond. You need your deadline, a written response, and free help. Here’s the order to do it in.

1. Find your deadline today. The summons states how long you have. It’s commonly around 20 to 30 days from service, and it varies by state and by how you were served. Put the date on a calendar and plan to file a few days early.
2. Read the complaint. Note who is suing, how much they claim, which account it is, and the court and case number. Compare it with your records. If you don’t recognize the plaintiff or the debt, that’s useful to know.
3. Get free help before you spend anything. Try an LSC-funded legal aid organization (generally for households at or below 125 percent of the federal poverty guidelines; other free programs have other rules), LawHelp.org, your court’s self-help center, or a law school clinic. Older adults can call the Eldercare Locator at 1-800-677-1116. Pew found that fewer than 10 percent of debt defendants have a lawyer, and those who do tend to fare better.
4. File a written Answer. An Answer responds to each numbered paragraph of the complaint by admitting it, denying it, or saying you don’t have enough information to admit or deny it. Responding isn’t admitting you owe the debt. Court self-help centers publish fill-in forms and guides; California’s is a good example. File the Answer with the clerk before your deadline, and deliver a copy to the plaintiff or its lawyer the way your state requires. Filing fees can run several hundred dollars (California lists $225 to $450), so ask about a fee waiver if you can’t afford it.
5. Raise the defenses that fit. Common ones include a debt past the statute of limitations, the wrong person or amount, improper service, and a plaintiff that can’t document that it owns the debt. An expired statute of limitations is a real defense to raise in your Answer, not a reason to skip responding: see Statute of Limitations on Debt by State (and the Reset Trap).
6. Say where you stand. If the honest answer is that you have no income or assets a creditor can collect, or that your only income is protected, say so where your court allows. Ask the self-help center where that belongs.
7. Show up and keep your paperwork. After you file, watch the mail for notices and hearing dates, because missing them can lose the case. Keep proof of filing and service, and tell the court if your address changes.

If the summons names LVNV Funding, Midland Funding, or a company you don’t recognize

Court-data analyses by January Advisors, reported by Pew, list debt buyers including LVNV Funding and Midland Funding among the most frequent filers of consumer debt lawsuits in the states with complete data, alongside card issuers such as Capital One and Discover. (Midland Credit Management, a name you may see on collection letters, is a sister company of Midland Funding.) People are often sued by a company they’ve never heard of rather than the lender they dealt with. Being sued by a large plaintiff says nothing on its own about whether you owe the debt or whether its numbers are right. The steps above are the same whoever sues you.

If a default judgment has already been entered

Don’t panic, and don’t assume it’s over. Many courts allow a request to set aside a default judgment for reasons such as improper service or a valid excuse for missing the deadline, but the deadlines are strict, and the CFPB warns that judgments can be very difficult to change. Contact legal aid or your court’s self-help center right away, and ask whether you were served correctly. Watch for garnishment or bank-freeze notices, which explain how to claim exemptions and how long you have. And never ignore an order to appear.

What This Isn’t

This article assumes a lawsuit has already been filed, a later stage than general collector harassment, so for the bigger picture start with How to Get Out of Debt: A Step-by-Step Plan. For what collectors can and can’t do around a lawsuit, see Debt Collector Rights: What They Can’t Do & How to Stop Calls. We’re not a law firm, and we’re not selling anything here.

Frequently Asked Questions

Can I ignore a debt lawsuit if I have no money?

No. Having nothing to collect doesn’t stop a default judgment, and that judgment can wait years for your situation to change. Respond anyway, even if your response is simply that you have no income or assets to collect.

What does “judgment proof” mean?

Someone whose income and assets are currently protected by law or too small to collect. It’s a temporary description of your finances, not a defense, and a court won’t recognize it unless you appear and raise it.

What happens if I don’t show up to debt court?

If you never file a response, the plaintiff can ask for a default judgment. If you responded but skip a scheduled hearing, you can lose the same way. If you can’t attend, contact the court beforehand.

Can I go to jail if I lose a debt lawsuit and can’t pay?

Not for owing the money. The CFPB says a collector can’t have you arrested over an unpaid debt. The narrow exception is defying a court order: if a judge orders you to appear or provide information and you ignore it, a judge may hold you in contempt or issue a warrant. That penalizes ignoring the court, not being poor.

Does a default judgment show up on my credit report?

Generally no. Since July 1, 2017, the three big bureaus haven’t included civil judgments. The judgment is still a public court record, though, and background-check and property searches can find it. The late payments behind the lawsuit may still appear on your credit report for years.

Does a judgment show up on a background check if it isn’t on my credit report?

It can. Screening companies can generally report a civil judgment for seven years from entry, or until the debt’s statute of limitations expires if that’s longer. A landlord or employer can also read the court docket directly.

Can I rent an apartment with a debt judgment against me?

Often yes, but it can be a hurdle, since some landlords search civil judgments and others don’t. Ask what a landlord screens for before paying an application fee, and make sure the court record shows the judgment as satisfied if you ever pay it. Nothing here guarantees an outcome.

What income can’t be touched by a debt judgment?

Generally, Social Security, SSDI, SSI, and certain other federal benefits are protected from private creditors, and unemployment benefits are protected in many states. Wages are partly protected. Exceptions include federal debts, taxes, and child or spousal support. See the protected-income section above.

Can they garnish unemployment benefits for debt?

In many states, not for ordinary consumer debts, but the rules come from state law and vary. Child support can be an exception, and you may need to claim the exemption if the money is in a bank account. Ask legal aid or check LawHelp.org.

Can debt collectors garnish wages years later?

Yes, if the judgment is still enforceable or has been renewed. It can sit unused while you’re unemployed, then be enforced once you have a paycheck. Federal law caps ordinary wage garnishment, and interest may have grown the balance meanwhile.

Does a judgment ever just expire on its own?

Often, in time. Enforcement periods are set by state law, commonly 5 to 20 years, and many states allow renewal. Ask legal aid to check yours, and don’t count on expiration as a plan.

Can I settle a debt lawsuit if I have no money?

Sometimes, but nothing is guaranteed. Responding opens the door to talking with the plaintiff or its lawyer, and the CFPB notes that people who owe a debt may be able to work out a settlement. Don’t agree to payments you can’t make, get any deal in writing, and check whether paying on an old debt could restart the statute of limitations.

Is a “judgment proof” letter to a debt collector enough?

No. A letter can tell a collector your income is protected, and the CFPB publishes a sample. But it doesn’t count as a response to the lawsuit. A timely response filed with the court does.

How do I file an answer to a debt lawsuit without a lawyer?

Get the Answer form or guide from your court’s self-help center, respond to each numbered allegation, list any defenses, file it with the clerk before your deadline, and deliver a copy to the plaintiff as your state requires. Ask about a fee waiver if you need one.