If a creditor sues you to collect on an unpaid debt and wins, they'll get a court judgment against you. This court order allows them to collect on the debt by seizing your real or personal property (or putting a lien on it), garnishing your wages, or levying your bank account. Personal property includes everything from household goods to vehicles. Real property includes things like your home or land. Though creditors can legally seize real and personal property that isn’t covered by an exemption, this isn't common because it can be costly for creditors. It's more common for creditors to use wage garnishment or a bank account levy.
Written by Attorney Andrea Wimmer.
Updated July 19, 2023
After not getting paid for a while, creditors will eventually file a lawsuit to try and collect the balance you owe. If the creditor wins the lawsuit (or you ignore it) they’ll get a judgment. A judgment is a court order that gives the creditor the right to seize or take certain property from you to satisfy the judgment. If you’re wondering what kinds of personal property may be at risk, this article is for you.
Can a Judgment Creditor Really Take My Property?
Once a creditor has a judgment, they have additional ways of getting you to pay them, including:
Judgment lien on real property, and — yes — even the seizure of personal property.
State law determines how long the judgment remains valid and enforceable.
What Is a Judgment Creditor?
A judgment creditor is someone you owe money to that sued you for nonpayment and won a court judgment against you. At this point, you’re called a judgment debtor. The court order may also be called a money judgment.
A debt collection lawsuit starts when you’re served with a summons and complaint. The summons tells you how long you have to respond, and the complaint outlines the reason for the lawsuit.
The amount of time you have to answer the summons is determined by the law in the state where the lawsuit is filed. It’s important not to lose track of that. If you don’t file an answer, the court will eventually enter a default judgment against you.
What Types of Property Can Be Seized by a Judgment Creditor?
Even though the judgment is a court order, the judgment creditor still has to follow state laws when it comes to enforcing it. Judgment creditors can only seize property that isn’t protected by an exemption. This includes real property and personal property.
What’s the Difference Between Personal Property and Real Property?
Real property refers to houses, land, and other types of real estate. Personal property is everything else — as long as you can touch it. Examples of personal property include household goods, furniture, cars, health aids, clothing, and musical instruments. Some assets don’t fall into either category, such as your life insurance, retirement plan, and IRA.
Exemptions apply to both personal and real property. The homestead exemption protects real property that’s used as a primary residence. That means a judgment creditor can’t seize or sell your home if it’s fully covered by the homestead exemption available to you.
With respect to personal property, most states have specific exemptions for specific types of property. Most protect typical household goods, health aids, clothing, and a motor vehicle up to a certain value. Federal law protects Social Security and disability benefits from debt collectors (with or without a judgment).
Exemptions also limit the amount of money that a judgment creditor can take under a wage garnishment. This is important, especially for minimum wage workers.
Upsolve User Experiences2,228+ Members Online
What's the Process for Seizing Non-Exempt Personal Property?
If you have non-exempt property that a judgment creditor wants to seize, a court-appointed officer or sheriff will serve you with a writ of execution. Once that’s done, the sheriff or officer will peacefully remove the property. The exact procedure, including what goes into a writ of execution, is determined by state law.
Once seized, the property is sold to the highest bidder at an auction. The sale proceeds from the auction are then used to first pay for the cost of taking the property and holding the auction sale, then to pay down the amount owed on the money judgment.
Why It's Not Common for Creditors To Seize Personal Property
Every step of the process costs the creditor money, so it’s rare to see one pursue a judgment debtor’s personal property. If you don’t have valuable assets and you’re still paying on a car loan, odds are a judgment creditor won’t try to pursue this. Instead, they’ll typically do a wage garnishment or bank account levy.
In a wage garnishment, the creditor takes money directly from your paycheck. If a creditor levies your bank account, it takes funds from your checking or savings accounts directly, unless you have exempt income (see below).
What Does It Mean To Be Judgment Proof?
If your income can’t be garnished and you don’t own valuable property that isn’t protected by an exemption, you’re considered judgment proof. While you can get sued, not even a judgment creditor can seize exempt property from you.
Keep in mind, being judgment proof is not always a permanent thing. If you’re out of work when the money judgment is made and find a job later, your wages can still be garnished.
What Kind of Income Can’t Be Garnished?
Many types of income are protected by exemptions and can’t be garnished. Federal benefits — such as Social Security, disability, and veteran’s benefits — are fully protected from garnishment by federal law.
Other types of income that are protected to varying degrees by federal or state law include:
Alimony or spousal support payments
Child support payments
Retirement benefits and income from retirement accounts
Public assistance payments
Income from a life insurance policy
Awards from a personal injury case
Although it rarely happens, judgment creditors can seize a debtor’s personal property to satisfy all or part of a money judgment. Exemptions set by state law protect certain personal property, a portion of your wages, and — in most states — an interest in a real property you’re using as a homestead.
If you’ve fallen on hard times getting sued can add insult to injury, but it’s important to keep on top of the lawsuit. Know that you’re not alone and you have access to several debt-relief options. If you’re not sure how to proceed, speak with a credit counselor or get a free consultation with a bankruptcy attorney to see if Chapter 7 bankruptcy is a good option for you.