Is it possible to be "too broke" for Bankruptcy?

  
           But when could someone be "too broke" to file a bankruptcy?  One example is when a potential bankruptcy debtor is what attorneys call judgement-proof.  One time a debt collector told me that my client was not judgment-proof because there was a judgment entered against him right now.  Always remember that debt collectors don't know everything because that is not at all what it means.  When someone is judgment-proof it means that they do not have any significant assets that can be garnished or attached by a creditor to pay a judgment.

          The most common example of potential bankruptcy clients I see at Halcomb Singler who are judgment proof are older folks living on Social Security and a pension.  Neither social security no a pension can be garnished by a creditor and when people are retired they have no paycheck for a creditor to garnish.  Therefore, it seems like a waste for judgment proof people to pay a bankruptcy attorney, gather the numerous documents necessary to file a bankruptcy petition and to go to a bankruptcy hearing when they are not subject to lose anything to a creditor.

        Another common example of being judgment-proof is when you are out of work and have only a small amount of personal property (click here for a discussion on Indiana Exemptions).  In Indiana you are allowed to have a minimal amount of personal property and home equity that creditors can't touch.  If you fall below these thresholds and aren't working they can't do anything.  As the old saying goes, you can't get blood from a turnip.  And it is completely true.

        That being said, even after I inform judgment-proof folks that they really don't need to file bankruptcy some decide to file anyway.  Why?  Generally, it is to stop the harassment of creditors and the obligation to attend court hearings.  In Indiana, once a creditor has obtained a judgment they will ask the court to set a hearing called a proceedings supplemental, which is a hearing at which the creditor is permitted to ask the debtor what property he owns, where he banks, where he works, and other questions to see how the creditor can get paid.  Just because this hearing happens once and the debtor doesn't have any assets or income that the creditor can take at that particular time doesn't mean that the creditor won't reset this hearing for another date.  The creditor can drag you into court every thirty days or so and ask you the same questions over and over again.  In Indiana, if you fail to appear for a proceedings supplemental a warrant can be issued for your arrest, so it is important to go.  So, now you are seeing why some people who are judgment-proof still decide to file bankruptcy sometimes.  They are tired of having to go to court to answer questions about their income and assets and are tired of receiving collection calls all day long, day after day.

         Whether to file a bankruptcy when you are judgment proof is a personal decision.  I have found that people have different thresholds of tolerance for being in debt.  For some people, the debt is a constant source of worry, fear and embarrassment and for others it is just a small bump in the road.  If you live in central Indiana including Hamilton, Marion, Boone, Madison, Tipton and Howard Counties and are considering bankruptcy you can contact me for a free consultation at my Carmel, Indiana office.


Halcomb Singler, LLP, is a debt relief agency.  It helps people file for bankruptcy under the bankruptcy code.  No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so.  The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.