Am I "Collection Proof?" What does that mean?

Being “Collection Proof” means that although you still owe a debt, your creditor has no legal way to collect that debt. There are laws that protect certain income and assets from debt collectors. This is also known as being “Judgment Proof,” because although creditors may still get a court judgment against you, they cannot enforce it.

Remember: Being "collection proof" is not permanent. You are "collection proof" only as long as your financial condition stays the same or gets worse. If your financial condition improves, creditors who have a judgment against you may still be able to collect money from you in the future (when you are no longer "collection proof").

Is My Income Protected? Income that is protected from "garnishment" (legally deducted from your check as the result of a court judgment against you) includes:

• Public Assistance Benefits (TCA, TEMHA)   (Md. Ann. Code Aft. 88A)
• Workers Compensation   (Md. Ann. Code Art. 101, § 50; 5 USC §8130)
• Supplemental Security Income/SSI   (42 USC §1383)
• State Police Pensions   (Md. Ann. Code Art. 88B, §31)
• Life Insurance or Annuity Proceeds   (Md. Ann. Code Art. 48A, §385)
• Retirement Benefits (most pensions)
• Unemployment Insurance Benefits *   (Md. Ann. Code Art. 95A §16)
• Social Security Benefits *   (42 USC §§407, 659)
• Veterans Benefits *   (38 USC §1301)

*Note that child support or alimony may be taken from Unemployment Benefits, Social Security Benefits, and Veteran Benefits.

Are My Assets Safe? The law allows you to keep the following safe from creditors or liquidation bankruptcy (Md. CJP Art. §11-504):

• Up to $6000 in cash or property (You must notify the court within 30 days from the date of attachment or levy by a sheriff).
• Up to $5000 worth of items necessary for the practice of any trade or profession (for example, tools, instruments, books, clothing/uniforms).
• Up to $1000 in household furnishings, goods, clothing, appliances, books, pets and other personal items.
• Money payable to you as the result of court judgments, insurance benefits, and compensation because of sickness, accident, injury or death.
• Professionally prescribed health aids.
• Your share in a qualified retirement plan.

When these exemptions are important - These exemptions will not keep your creditor from recovering collateral on a loan. For example, house or car loans are "secured debts" which means that the creditor can legally seize them if you fall behind in your payments. These exemptions are important if you did not put up collateral (such as a house or a car) for a loan. The creditor must go to court and get a judgment against you showing you owe the debt. The creditor must then also go to court to get legal permission to take your property to repay your debt. This is when the exemptions apply.