The term judgment-proof or judgment proof is an adjective for persons against whom enforcing a judgment is not feasible, or not worth the costs of pursuing litigation. The term is used in situations where a plaintiff would be no better off with a favorable judgment than they would be had they chosen not to sue the defendant in the first place.
In other words, people are judgment-proof if they lack the resources or insurance to pay a court judgment against them. For example, suppose that a thief steals your car, sells it, and then burns all of his worldly possessions. Even if you sued him and won, you could not recover anything because the thief is judgment-proof. However, those who are judgment proof are not necessarily poor.
A person may be considered judgment proof if:
- The judgment being sought far exceeds the defendant’s available assets, financial resources, and insurance coverage.
- The defendant’s assets are statutorily protected from being used to satisfy a judgment.
- The defendant’s assets are outside of the court’s jurisdiction (and the plaintiff is not able to seek enforcement of the judgment in the appropriate court through the Full Faith and Credit clause).
Becoming judgment proof is extremely advantageous for potential defendants, as it reduces both the risks associated with being sued and the incentive for plaintiffs to initiate litigation. This allows potential defendants to offload the costs of wrongful behavior onto the public.
Conversely, being injured by a judgment proof defendant can be devastating for plaintiffs. Although they retain the legal right to sue the defendant, their available recourse is limited to achieving a symbolic victory, as they have no hope of recovering their damages.
Strategies to protect plaintiffs from judgment proof defendants:
One strategy to protect plaintiffs is for legislators to reduce the prevalence of judgment proof defendants. Legislators can accomplish this by mandating insurance for dangerous activities, ensuring that victims can recover something in the event of an accident. All US states have adopted this approach to some extent, with all states requiring drivers to have a form of auto insurance. Many states go a step further by requiring businesses to carry some form of business insurance.
Another strategy is for plaintiffs to sue multiple defendants for a single incident. By suing multiple defendants at once, defendants can be held jointly liable, or jointly and severally liable for the damages. This has the effect of pooling the resources of each defendant, greatly increasing the chance that a judgment can be successfully enforced against one or more of the parties.
Along this same vein, plaintiffs may choose to sue employers for the actions of their employees, provided the actions were taken within the scope of their employment. This allows the plaintiff to hold businesses and business owners vicariously liable for their employees and contractors. This gives plaintiffs a better chance at recovery, as although it is common for low level employees to be judgment proof, employers typically have access to more financial resources and are better insured.
[Last updated in June of 2023 by the Wex Definitions Team]