Collecting Money from Someone with Little or No Money and Assets

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.