Being Sued for Car Accident But Have No Assets, Judgment Proof Complete Legal Protection Guide

If you’re being sued for a car accident but have no assets, you’re likely “judgment proof”—meaning creditors cannot collect what you don’t have. However, you still face serious consequences including wage garnishment (up to 25% under federal law), credit damage, and potential future asset seizure. Never ignore a lawsuit.

Here’s a reality check: Over 60% of Americans don’t have $1,000 in savings, according to recent Federal Reserve data. Yet car accidents happen to everyone—regardless of income level.

Every year, millions of individuals with limited financial resources face the terrifying prospect of being sued for accidents they caused. The good news? Being broke actually provides substantial legal protection that wealthy defendants don’t have.

What Does “Judgment Proof” Actually Mean?

Being “judgment proof” means you don’t have assets or income that creditors can legally seize to satisfy a court judgment. Think of it as an unintentional financial shield.

But let’s be clear: judgment proof status doesn’t prevent someone from suing you. It just means collecting money from you becomes extremely difficult or impossible.

Here’s what happens when you’re judgment proof. A plaintiff can still file a lawsuit, obtain a judgment, and win $50,000 or $500,000 against you. On paper, you owe that money.

In practice? If you have no assets, no significant income, and all your property falls under legal exemptions, there’s nothing for them to take.

This isn’t a legal loophole—it’s a fundamental protection built into the American legal system to prevent debtors’ prisons and ensure people can maintain basic living standards even after financial disasters.

Understanding Your Legal Liability After an At-Fault Accident

When you cause a car accident, you become legally liable for damages. This includes medical bills, property damage, lost wages, and pain and suffering.

Your auto insurance should cover these damages up to your policy limits. Most states require minimum coverage of $25,000 to $50,000 per person injured.

The problem emerges when damages exceed your insurance coverage—and you have no personal assets to cover the difference.

Let’s say you cause an accident resulting in $200,000 in damages, but you only carry $25,000 in liability insurance. You’re personally responsible for the remaining $175,000.

If you have no assets, the injured party faces a difficult choice: spend thousands pursuing a judgment against someone who can’t pay, or walk away.

Many plaintiff attorneys won’t take cases against judgment-proof defendants because they work on contingency—meaning they only get paid if they collect money. No collection means no payment for their work.

What Assets Are Protected by Law?

Even if you think you have “nothing,” certain assets receive absolute legal protection from creditors—including car accident judgments. These exemptions vary by state, but federal law provides a baseline.

Federal Exemptions Under 11 U.S.C. § 522

The federal bankruptcy code protects specific property types regardless of your financial situation. Many states have adopted these exemptions or created their own, often more generous versions.

Social Security Benefits Under 42 U.S.C. § 407, Social Security retirement, disability (SSDI), and survivor benefits are completely exempt from garnishment for most debts, including car accident judgments.

If your only income comes from Social Security, creditors cannot touch it. Period.

Supplemental Security Income (SSI)
SSI benefits enjoy even stronger protection under federal law. These funds cannot be garnished for any private debt.

Veterans Benefits Under 38 U.S.C. § 5301, VA disability payments and veterans’ pensions are fully protected from creditor claims.

Unemployment Benefits Most states protect unemployment compensation from garnishment. The specific statute varies by state, but this protection is nearly universal.

Workers’ Compensation Benefits paid for work-related injuries typically cannot be garnished to satisfy car accident judgments.

Retirement Accounts ERISA-qualified retirement plans like 401(k)s and pensions receive unlimited protection. IRAs are protected up to $1,512,350 (2024 limit) under federal bankruptcy law.

This means if your only assets are your 401(k) and Social Security income, you’re essentially judgment proof—even if someone obtains a massive judgment against you.

State-Specific Asset Protection

States provide additional exemptions beyond federal protections. Let me break down key jurisdictions:

Texas: Extremely Generous Protections Texas offers some of America’s strongest debtor protections. Under the Texas Property Code § 42.001, you can protect:

• Homestead (primary residence) with unlimited value
• One vehicle per licensed driver
• Personal property up to $100,000 for families ($50,000 for individuals)
• Current wages for personal services (except for child support, taxes, or student loans)
• Retirement accounts without dollar limits

If you live in Texas with no assets beyond these categories, you’re virtually judgment proof against car accident claims.

Florida: Homestead Haven Florida’s Article X, Section 4 of the Florida Constitution protects unlimited home equity (with size restrictions), plus $1,000 in personal property and $4,000 in vehicles.

Even more importantly, Florida law under Florida Statute § 222.11 protects wages from garnishment if you’re head of household providing more than half the support for a child or dependent.

This means a Florida resident earning $40,000 annually with a spouse and kids at home cannot have wages garnished for car accident judgments—making them effectively judgment proof even with regular income.

California: Head of Household Protection California law provides strong wage garnishment protections. Under California Code of Civil Procedure § 706.052, heads of household cannot have more than 25% of disposable earnings garnished—and often less depending on income levels.

California’s automatic homestead exemption (discussed in our previous article about protecting your home from car accident liability) reaches up to $722,151 in high-cost counties.

New York: Substantial Wage Protection New York exempts 90% of earnings from garnishment under New York Civil Practice Law and Rules § 5205(d)(1), or the amount by which your weekly income exceeds 30 times the federal minimum wage—whichever is greater.

For someone earning $500 per week ($26,000 annually), only about $50 per week could be garnished—making judgment collection barely worth the effort for creditors.

The Harsh Reality: What Can Still Be Taken

Being judgment proof doesn’t mean you’re completely untouchable. Certain income and assets remain vulnerable even under protection statutes.

Wage Garnishment: Your Primary Risk

Federal law under the Consumer Credit Protection Act (CCPA) allows creditors to garnish up to 25% of your disposable earnings, or the amount by which your earnings exceed 30 times the federal minimum wage ($7.25/hour = $217.50/week), whichever is less.

Let’s break this down with real numbers:

If you earn $300 per week in disposable income (after taxes), the maximum garnishment is 25% = $75 per week.

If you earn $250 per week, only the amount above $217.50 can be garnished = $32.50 per week.

If you earn $217.50 or less per week, nothing can be garnished.

Many states provide even stronger protections. But if you work and earn above minimum thresholds, some portion of your wages remains vulnerable to garnishment for car accident judgments.

Bank Account Levies

Money in checking or savings accounts can be seized (levied) by judgment creditors—unless it comes from protected sources.

Here’s the trick: if you deposit Social Security or VA benefits into your bank account, those funds remain protected for 60 days under federal law. Banks must identify and protect these deposits from garnishment.

However, once you mix protected funds with other income or let them sit beyond 60 days, tracking becomes complex and protection weakens.

Non-Exempt Personal Property

While household goods, clothing, and necessities are typically exempt, certain personal property can be seized:

• Luxury vehicles beyond the single-vehicle exemption
• Boats, RVs, or recreational vehicles (in most states)
• Valuable jewelry or collections
• Investment properties (non-homestead real estate)
• Business assets and inventory
• Cash and investment accounts (non-retirement)

If you truly have no assets, this doesn’t apply. But surprisingly many people who consider themselves “broke” actually own seizable property.

Tax Refunds

Federal and state tax refunds are generally NOT protected from garnishment. If you typically receive a $3,000 refund each year, judgment creditors can intercept it.

This creates a frustrating situation where someone living paycheck to paycheck suddenly loses their annual refund to a car accident judgment from years earlier.

The Legal Process: What Actually Happens When You’re Sued

Understanding the lawsuit timeline helps you make informed decisions about how to respond.

Step 1: You Receive a Summons and Complaint Someone hand-delivers or mails legal papers notifying you of the lawsuit. In most states, you have 20-30 days to respond.

NEVER ignore this document. Even if you’re judgment proof, failing to respond allows a default judgment that creates serious long-term problems.

Step 2: You Must File an Answer Your response (called an “Answer”) addresses each allegation. You can admit, deny, or claim insufficient knowledge.

You can file this yourself or hire an attorney. If you cannot afford a lawyer, look for legal aid services in your area—many offer free representation for defendants in civil cases.

Step 3: Discovery Phase Both sides exchange information, documents, and evidence. This is where the plaintiff’s attorney investigates your financial situation.

They’ll request bank statements, tax returns, employment records, and asset information. This discovery reveals whether you’re truly judgment proof or hiding assets.

Step 4: Settlement Negotiations Most car accident cases settle before trial. If you’re clearly judgment proof, the plaintiff may accept your insurance policy limits and walk away.

Why? Because pursuing you through trial and collection costs $10,000-$50,000 in attorney fees with zero chance of recovery. It makes no economic sense.

However, this assumes you’re transparent about your financial situation. Hiding assets destroys settlement opportunities and triggers aggressive collection efforts.

Step 5: Trial (If No Settlement) If your case goes to trial, a judge or jury determines liability and damages. With no insurance coverage and no assets, plaintiffs may decline to pursue trial against you.

But don’t count on this. Some plaintiffs want their “day in court” regardless of collection prospects. Others hope your financial situation improves over time.

Step 6: Judgment and Collection Attempts If the plaintiff wins, they obtain a judgment—a court order stating you owe a specific amount.

Then begins the collection process: wage garnishment applications, bank account levies, and property lien filings. If you’re truly judgment proof, these efforts fail—but they continue periodically for years.

Real-World Case Study: The Uninsured Driver Who Lost Nothing

Let me share a case that perfectly illustrates judgment-proof status in action.

In 2021, Marcus, a 29-year-old restaurant worker in Orlando, Florida, ran a red light and T-boned another vehicle. The other driver suffered serious injuries requiring two surgeries and months of physical therapy.

Total damages: $187,000.

Marcus’s situation:

• No car insurance (he let his policy lapse two months earlier)
• Annual income: $28,000 as a line cook
• No savings or investments
• Rented apartment (no real estate)
• 11-year-old car worth maybe $3,000
• Married with two young children

The injured driver sued Marcus for the full $187,000. Marcus couldn’t afford an attorney, so he worked with a legal aid organization to file his response.

Here’s what happened:

The plaintiff’s attorney conducted extensive discovery into Marcus’s finances. They found exactly what Marcus disclosed—virtually nothing to seize.

Under Florida Statute § 222.11, Marcus’s wages were completely protected because he was head of household supporting his wife and children. Florida law prevents wage garnishment for consumer debts when you’re head of household.

His car fell within Florida’s $1,000 vehicle exemption. He had no property, investments, or savings to seize.

The plaintiff obtained a $187,000 judgment. On paper, Marcus owes this money.

In practice? Three years later, the plaintiff has collected exactly $0. Every collection attempt has failed because Marcus remains judgment proof under Florida law.

The judgment damaged Marcus’s credit score severely—he cannot buy a house or finance a car. But he kept his job, his wages, his vehicle, and his ability to support his family.

Was it ideal? Absolutely not. Did the injured party receive justice? Arguably no. But this case demonstrates how judgment-proof status actually works in the American legal system.

The Insurance Question: Why Your Policy Matters Most

Before discussing asset protection, let’s address the elephant in the room: adequate insurance prevents this entire nightmare.

State minimum coverage—often $25,000/$50,000—is dangerously insufficient in today’s medical cost environment. A serious accident easily generates $100,000-$500,000 in damages.

Even if you have no assets to protect, liability insurance serves crucial functions:

1. It Protects Your Future Judgments last 10-20 years in most states and can be renewed. Today you’re judgment proof, but what about in five years when you inherit money, start a business, or buy a house?

That old judgment comes roaring back with accumulated interest—potentially 7-10% annually depending on state law.

2. Insurance Companies Negotiate Settlements Insurers have experienced attorneys who negotiate effectively. They often settle cases within policy limits, preventing personal judgments entirely.

When you have no insurance, you’re on your own against sophisticated plaintiff attorneys who do this for a living.

3. Legal Defense Costs Are Covered Your liability insurance includes coverage for attorney fees to defend you. Without insurance, you pay out of pocket—often $250-$500 per hour for competent legal representation.

Even if you’re judgment proof regarding the damages, you still need defense counsel. This can cost $10,000-$30,000 for a contested case.

Consider this: for $50-$100 per month, you can carry $250,000/$500,000 in liability coverage. Add a $1 million umbrella policy for another $20-$40 monthly.

That’s the cost of a couple of streaming services—to prevent financial disaster. If you’re driving with minimal insurance or none at all, you’re taking an unconscionable risk not just with other people’s safety but with your financial future.

Bankruptcy: The Nuclear Option That Actually Works

If you’re facing a massive car accident judgment, bankruptcy might be your best option—and it’s far less scary than most people think.

Chapter 7 Bankruptcy Under 11 U.S.C. § 727, Chapter 7 bankruptcy can discharge most car accident judgments within 3-4 months.

There’s one critical exception: if the accident involved willful and malicious injury. Under 11 U.S.C. § 523(a)(6), debts from intentional wrongdoing cannot be discharged.

What does this mean practically? A typical negligence case (you ran a red light, you were texting) is dischargeable. A DUI accident might not be—courts split on whether drunk driving constitutes willful and malicious conduct.

If your accident was simple negligence, Chapter 7 bankruptcy eliminates the judgment permanently. You start fresh.

The cost? Usually $1,500-$3,000 including attorney fees. Many bankruptcy attorneys offer payment plans because they understand clients are broke.

Chapter 13 Bankruptcy Chapter 13 creates a 3-5 year repayment plan based on your disposable income. Under 11 U.S.C. § 1322, you propose to pay what you can afford—often $50-$200 monthly.

After completing the plan, any remaining balance on the car accident judgment is discharged.

This option works well if you have regular income but need breathing room. The automatic stay under 11 U.S.C. § 362 immediately stops all garnishment and collection activities.

Bankruptcy Myths You Should Ignore

Myth: “Bankruptcy ruins your life forever” Wrong. Bankruptcy stays on your credit report for 7-10 years, but many people rebuild excellent credit within 2-3 years. Compare this to 10-20 years of trying to avoid judgment collection.

Myth: “You lose everything in bankruptcy” False. Exemptions protect your home (within limits), vehicle, retirement accounts, household goods, and other essentials. Most Chapter 7 filers lose nothing.

Myth: “You can never file bankruptcy more than once” Not true. You can file Chapter 7 every 8 years, Chapter 13 every 2 years (though discharge timing varies).

If you’re facing a six-figure judgment with no way to pay, bankruptcy offers a legitimate, legal solution. It’s what the system is designed for.

State-Specific Regulations That Protect You

Understanding your state’s specific laws is critical because protection levels vary dramatically.

Community Property States

Nine states follow community property rules: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

In these states, debts incurred by one spouse may become community debts—meaning creditors can pursue both spouses’ assets and income.

However, this cuts both ways. If you’re the non-liable spouse in a community property state, you might seek legal separation to protect your separate property from your spouse’s car accident judgment.

This seems extreme, but it’s a legitimate asset protection strategy in some cases.

States with Strong Debtor Protections

Texas, Florida, and South Dakota lead the nation in debtor-friendly laws. If you’re considering relocation and face significant judgment risk, these states offer maximum protection.

Conversely, states like Pennsylvania, New Jersey, and Maryland provide minimal exemptions—making judgment-proof status harder to achieve.

You cannot move states simply to avoid an existing judgment (courts see through this), but understanding your current state’s laws helps you assess true risk.

Statute of Limitations on Judgments

Judgments don’t last forever—but they last long enough to cause serious problems:

• California: 10 years (renewable for another 10)
• Texas: 10 years (renewable up to 20 years total)
• Florida: 20 years (renewable for another 20)
• New York: 20 years
• Illinois: 7 years (renewable up to 27 years total)

During this period, creditors can periodically attempt collection—checking if your financial situation has improved.

They’ll monitor public records for property purchases, business licenses, inheritance records, and other signs of improved finances.

What You Must Do When Sued (Even With No Assets)

Never ignore a lawsuit regardless of your financial situation. Here’s your action plan:

Immediate Actions (Within 7 Days)

1. Read the summons and complaint carefully
2. Note your response deadline (usually 20-30 days from service)
3. Gather documentation about your financial situation
4. Contact your insurance company immediately (if you have coverage)
5. Seek free legal consultation through legal aid or bar association

Within 20 Days

1. File your Answer with the court (do not default)
2. Respond to each allegation in the complaint
3. Assert all applicable defenses
4. Consider requesting a different court location if sued far from your home

Throughout the Process

1. Be completely honest about your assets in discovery
2. Provide requested financial documents promptly
3. Do not transfer assets to family members (fraudulent conveyance)
4. Attend all court hearings and depositions
5. Consider bankruptcy consultation if judgment appears inevitable

Critical: Never Hide Assets Hiding assets constitutes fraud and can:

• Convert a dischargeable debt into a non-dischargeable one in bankruptcy
• Subject you to contempt of court charges
• Extend the judgment indefinitely
• Result in criminal charges in extreme cases

Plaintiff attorneys investigate thoroughly. They’ll check property records, business filings, vehicle registrations, and conduct debtor examinations under oath.

Getting caught hiding assets destroys your credibility and eliminates settlement opportunities.

Long-Term Consequences of Being Judgment Proof

Being judgment proof protects your current assets, but it creates lasting challenges:

Credit Score Devastation A civil judgment tanks your credit score by 50-150 points. This affects:

• Ability to rent apartments (landlords check judgments)
• Employment opportunities (some employers run credit checks)
• Insurance rates (higher premiums with poor credit)
• Any future borrowing capacity

Professional Licensing Issues Some professional licenses—attorneys, CPAs, real estate agents, financial advisors—require disclosure of unsatisfied judgments. Large judgments can threaten professional careers.

Future Asset Exposure That judgment sits dormant for years. When you inherit money, win the lottery, sell property, or improve your finances, creditors can garnish those funds.

Stress and Mental Health Impact Living with a six-figure judgment hanging over your head creates significant psychological stress, even if current collection is impossible.

Relationship Complications Future romantic partners may be hesitant when they discover your judgment. It complicates financial planning, home buying, and combining finances.

Strategies to Minimize Your Vulnerability

Even with limited resources, you can take steps to protect yourself:

1. Maximize Protected Assets If you have any money, put it in protected accounts:

• Contribute to 401(k) or IRA (protected from most creditors)
• Keep emergency funds in accounts receiving only protected income (Social Security, VA benefits)
• Pay off non-exempt property (cars, electronics) to reduce equity subject to seizure

2. Structure Income Carefully If you’re self-employed or have flexible income, consider:

• Paying yourself through an S-corporation (some states don’t allow garnishment of corporate distributions)
• Ensuring your spouse works (their income may be protected if judgment is only against you)
• Timing large payments to avoid bank account levies

3. Understand Your State’s Laws Meet with a debtor-defense attorney or asset protection specialist to understand your specific protections. Many offer free initial consultations.

4. Consider Moving to Debtor-Friendly States If you’re already planning relocation, choosing a state with strong exemptions provides added protection. But never move solely to avoid a judgment—courts can reverse transfers and deny exemptions.

5. Document Everything Keep meticulous records of:

• Your asset inventory
• Sources of all income
• Medical expenses and financial hardships
• Communication with creditors

This documentation proves judgment-proof status and supports settlement negotiations.

Working with the Injured Party: Settlement Is Possible

Even if you’re judgment proof, the injured party still deserves compensation. Settlement remains possible even with no assets.

Payment Plans Some plaintiffs accept $25-$100 monthly payments for extended periods. While this never pays off a large judgment, it demonstrates good faith.

More importantly, you can often settle by agreeing to pay something (even nominal amounts) in exchange for the plaintiff releasing the judgment.

Insurance Policy Limits Settlement If you have any insurance—even minimal coverage—the plaintiff will typically accept policy limits to avoid the cost and uncertainty of trial.

Push for a “policy limits settlement” that includes a release preventing future claims against you personally.

Offsetting Social Benefits If the injured party has health insurance, Medicare, or Medicaid, those carriers paid most medical bills. The plaintiff’s actual loss might be much smaller than total damages.

Use this in settlement negotiations—the plaintiff already recovered most costs through insurance.

Bankruptcy Threat If you file bankruptcy, the plaintiff gets nothing and spends money opposing your discharge. This creates leverage in settlement negotiations.

Offering $1,000-$5,000 (borrowed from family or saved over months) to avoid bankruptcy can be attractive to plaintiffs facing zero recovery otherwise.

When Professional Legal Help Is Essential

While you can handle some aspects yourself, certain situations absolutely require an attorney:

You Must Hire an Attorney If:

• Damages exceed $50,000
• Serious injuries or death occurred
• The plaintiff alleges intentional conduct (assault, DUI, reckless driving)
• You have any non-exempt assets you need to protect
• Multiple parties are suing you
• The accident occurred during employment (workers’ comp issues)

Look for attorneys who specialize in defense work or civil litigation defense. Many work on sliding scale fees for defendants with limited resources.

Consider an Attorney For:

• Reviewing settlement offers
• Filing bankruptcy
• Responding to wage garnishment orders
• Defending against asset seizure attempts
• Negotiating payment plans

Even a single consultation ($200-$500) can provide crucial guidance about your specific situation.

Frequently Asked Questions

Can I go to jail for not paying a car accident judgment? 

No. The United States eliminated debtors’ prisons in the 1800s. You cannot be jailed simply for owing money on a civil judgment. However, you can be held in contempt of court if you refuse to comply with court orders during collection proceedings, such as failing to appear for a debtor’s examination. This contempt can result in jail time—not for the debt itself, but for disobeying court orders.

How long can creditors pursue me for a car accident judgment? 

Judgment enforcement periods vary by state, typically ranging from 7-20 years, with many states allowing renewals. For example, California judgments last 10 years and can be renewed once for another decade. Florida judgments last 20 years with renewal options extending this even further. During this entire period, creditors can periodically attempt collection if your financial situation improves.

What happens if I just ignore the lawsuit completely? 

Ignoring a lawsuit is the worst possible response. The court will enter a default judgment against you for the full amount requested—often without any evidence of damages. This judgment follows you for decades, appears on background checks, destroys credit, and gives creditors maximum collection rights. Always respond to lawsuits even if you plan to immediately file bankruptcy or believe you’re judgment proof.

Can creditors take my Social Security or disability benefits? 

No. Social Security retirement, disability (SSDI), and SSI benefits are completely protected from garnishment for private debts like car accident judgments under 42 U.S.C. § 407. However, these protections don’t apply to federal debts like taxes or federal student loans. If you deposit benefits into a bank account, inform your bank that the funds are exempt—they should protect them from levy.

Will my spouse’s income and assets be taken for my car accident? 

This depends on your state’s laws and how assets are titled. In community property states, debts incurred during marriage may become community debts, potentially exposing your spouse’s assets. In common law states, only assets you own jointly are typically at risk. Your spouse’s separate property and income usually remain protected. However, if you jointly own a home or accounts, those could be reached by creditors up to your ownership percentage.

Is it worth filing bankruptcy for a car accident judgment? 

Yes, in many cases. If you face a judgment you cannot realistically pay over your lifetime, bankruptcy offers a fresh start. Chapter 7 bankruptcy typically costs $1,500-$3,000 and discharges most car accident judgments within 3-4 months. The exception is judgments for willful and malicious injury (like DUI accidents). Compare this cost to decades of damaged credit, wage garnishment, and collection harassment—bankruptcy often makes financial sense.

Can I negotiate a settlement even if I have no money? 

Absolutely. Many plaintiffs accept payment plans, reduced lump sums, or even nominal settlements because collecting from judgment-proof defendants is nearly impossible. Offering $2,000-$5,000 (borrowed from family or saved over months) can be attractive to a plaintiff facing years of fruitless collection efforts. The key is honest communication about your financial situation and demonstrating good faith.

What if I get inheritance or win money in the future? 

Judgments remain on file for years or decades. If your financial situation improves—through inheritance, lottery winnings, property sale, or career advancement—creditors can resume collection efforts. They monitor public records and periodically check your status. This is why bankruptcy or settlement makes sense even when you’re currently judgment proof—it prevents future asset loss.

How much of my paycheck can be garnished? 

Federal law limits wage garnishment to 25% of disposable earnings or the amount by which your earnings exceed 30 times the federal minimum wage ($217.50 per week), whichever is less. Some states provide stronger protection. For example, Florida prohibits wage garnishment entirely for heads of household. If you earn less than $217.50 per week after taxes, federal law prevents any garnishment.

Should I transfer my assets to family members to protect them? 

No. Never transfer assets after an accident or lawsuit to avoid creditors. This constitutes fraudulent conveyance under bankruptcy law and can result in the transfers being reversed, denial of bankruptcy discharge, civil penalties, and even criminal charges. Courts look back 2-4 years for fraudulent transfers. Any asset protection must be established before legal problems arise.

Your Action Plan: What To Do Right Now

If you’re facing a car accident lawsuit with limited assets, follow this plan:

This Week:

1. Respond to the lawsuit – File your Answer within the court deadline
2. Inventory your assets – List everything you own and its value
3. Research your state’s exemptions – Understand what’s protected
4. Contact legal aid – Most areas have free services for low-income defendants
5. Notify your insurance company – Even if coverage is minimal

This Month:

1. Consult with a bankruptcy attorney – Most offer free consultations
2. Gather financial documents – Tax returns, bank statements, pay stubs
3. Document your income sources – Especially if from protected sources like Social Security
4. Stop using credit cards – Don’t accumulate more debt before potential bankruptcy
5. Consider settlement options – Explore whether borrowing small amounts for settlement makes sense

Long-Term:

1. Increase insurance coverage – Once this case resolves, never drive underinsured again
2. Build emergency fund – Even $1,000 in protected savings helps with future crises
3. Monitor your credit – Track the judgment’s impact and dispute errors
4. Plan for financial improvement – Consider how future earnings might be protected
5. Maintain detailed records – Document your judgment-proof status for ongoing negotiations

The Bottom Line: You Have More Protection Than You Think

Being sued for a car accident when you have no assets is terrifying. But the American legal system provides substantial protections for people in your situation.

You cannot be jailed for debt. Your Social Security, disability, unemployment, and retirement accounts are protected. Your wages are protected (up to 75% federally, often more by state law). Your basic household goods, clothing, and necessities cannot be seized.

If you’re truly judgment proof, the worst case scenario is having a judgment on your credit report for 7-10 years—not homelessness or destitution.

However, never ignore a lawsuit. Respond, be honest about your finances, and seek professional legal help when needed. Consider bankruptcy if the judgment is substantial—it offers a fresh start rather than decades of financial limbo.

Most importantly, once you resolve this crisis, prioritize adequate insurance coverage. The cost of proper insurance is a fraction of the stress, expense, and risk of driving uninsured or underinsured.

You’re facing a difficult situation, but you have legal rights and protections. Use them.

Disclaimer: This article provides general legal information only and does not constitute legal advice. Laws vary significantly by state and individual circumstances. Consult with a licensed attorney in your jurisdiction for guidance specific to your situation.

Last Updated: October 2025 

About the Author

Sarah Klein, JD, is a former civil litigation attorney with over a decade of experience in contract disputes, small claims, and neighbor conflicts. At All About Lawyer, she writes clear, practical guides to help people understand their civil legal rights and confidently handle everyday legal issues.
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