Collecting Money from Someone with Little or No Money and Assets

Collecting money from someone with little to no money or assets is virtually impossible. If someone has little income and few assets, they are "judgment proof." Even if you win against them in court, you effectively lose because they are unable to pay. Luckily, the statute of limitations varies by state, and you may have a few years to wait for the person to become financially secure enough to sue. Learn more about how to collect money from someone with little to no assets with our free legal tool below.

UPDATED: Jul 12, 2023Fact Checked

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Jeffrey Johnson

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 12, 2023

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UPDATED: Jul 12, 2023Fact Checked

How to go about collecting money from someone with nothing to give is a common question. Unfortunately, there is no good answer—if someone has little income and few assets, they are effectively “judgment proof” and even if you win against them in court, you effectively lose: you spent the time and money to sue and receive nothing in return.

However, what can give you some hope of recovery is this: circumstances change. Someone who is unemployed now will hopefully not always be unemployed. Someone who has no assets now may have assets later.

How does this help? First, you don’t have to sue the person immediately. For every cause of action, or potential legal claim, there is a “statute of limitations” setting out a period of time you have to sue. This period is typically measured in years, and for many common grounds to sue, might be 3 to 6 years. Always consult with an attorney right away, as soon as you think you may have grounds to sue, to determine what the statute of limitations for your claim is—if you exceed the statute, you will be barred from suing. So even if you don’t think you’d sue yet—or you’re not certain you’d sue at all—immediately check to see how long you have.

Say that you loaned a friend money in exchange for a promissory note. If the statute of limitations to sue on contracts (including promissory notes) is 6 years in your state, you could sue him any time up to 6 years after he defaulted on paying you. That gives you 6 years to see if he gets a job, wins the lottery, marries well, or comes into an inheritance.

Then even after you sue and win in court, there’s a statute of limitations for enforcing the judgment, or using legal process to collect. These statutes are often another 5, 6, 10, or even 20 years. This means that you could effectively have a total of 11, 12, 16, or even 26 years in many cases to try to collect on your promissory note (from the above example), depending on the statute of limitations for judgments in your state.

Therefore, there may no way to recover money now … but there may be in the future. It might make sense, if the person who owes you is in financial distress, to hold off on suing as long as possible, to give him time to get on his financial feet. Even if he’s still in bad shape, you might sue before the statute runs out to then give yourself another period of years to see if he’s worth trying to collect from.

Case Studies: Collecting Money from Someone With Little or No Money and Assets

Case Study 1: John Doe

John Doe borrowed a significant sum of money from his friend, Jane, with a promise to repay it within a specified period. However, due to a series of unfortunate events, John lost his job, faced financial hardships, and depleted his savings. Jane, considering legal action to recover her money, consulted with an attorney to explore her options.

The attorney advised Jane that although John currently lacks the means to repay the debt, there is a possibility of his financial situation improving in the future.

Since the statute of limitations for contractual claims in their state is six years, Jane has the option to wait and assess if John’s circumstances change within that timeframe.

If John secures employment, acquires assets, or receives an inheritance, Jane may have a stronger case for recovering the owed amount.

Case Study 2: Sarah Smith

Sarah Smith operated a small business and provided services to a client, Mark Johnson. Unfortunately, Mark experienced severe financial setbacks and ultimately declared bankruptcy. Sarah, left with unpaid invoices, sought advice from a legal professional on how to proceed.

The attorney informed Sarah that pursuing legal action against Mark might not yield favorable results given his bankruptcy status. However, they suggested monitoring the situation closely.

In some cases, individuals who file for bankruptcy may eventually recover financially. If Mark’s circumstances improve and he successfully emerges from bankruptcy, Sarah may have the opportunity to negotiate a payment plan or seek reimbursement for the outstanding debt.

Case Study 3: Emily Davis

Emily Davis rented out her property to a tenant, Michael Thompson. Over time, Michael fell behind on rent payments and exhibited no signs of improvement in his financial situation. Frustrated, Emily consulted with a lawyer to explore her options for collecting the unpaid rent.

The lawyer advised Emily that, in cases where tenants have limited financial resources, pursuing legal action may not be the most effective solution.

Instead, they recommended exploring alternative strategies, such as negotiating a payment plan or seeking assistance from a debt collection agency.

Additionally, the attorney highlighted the importance of documenting all communication and financial transactions with the tenant to support any future legal action if circumstances change.

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Jeffrey Johnson

Insurance Lawyer

Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

Insurance Lawyer

Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.

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