Every driver on the road has the potential to cause a car accident, regardless of how safe of a driver they are.
To deal with the inevitability of car crashes, state legislatures have instituted mandatory insurance requirements for all drivers. However, more than a few drivers fail to comply with these requirements and continue to drive without any coverage. When this type of situation occurs, an attorney can pursue the driver’s assets.
However, what if you find yourself being sued for a car accident but have no assets? On the other hand, perhaps you are suing someone without assets. How does a claim for compensation work in these situations? It largely depends on the circumstances.
When Assets Come into Play
Insurance companies handle much of the compensation for car accidents. However, there are many cases where the insurance system falls short, either because the losses exceed a policy’s limits or the driver failed to acquire the proper coverage.
When either of these situations occurs, the suing party can go after the offending driver directly, at least on paper. In reality, it is usually only practical to sue someone for compensation if they have the ability to pay.
Because of this, some accident-causing drivers who find themselves being sued for a car accident without assets may end up being considered “judgment proof.”
“Judgment proof” means a person’s situation is such that suing them would yield no worthwhile benefit. For a driver who caused a car crash and is facing a suit but has no assets, being considered ”judgment proof” is not the worst outcome. However, an injury victim in need of significant compensation could be out of luck.
Options When There Are No Assets
If you are being sued for a car accident but have no assets, you may still be on the hook. Although some parties may decide not to pursue a case due to your lack of assets, others might decide to go ahead with legal action.
If you are the injured party and are faced with a driver who has no assets, you will need to discuss the issue with an experienced car accident attorney to weigh all of the factors and explore the potential sources of compensation that are available.
Employment Income as a Source of Compensation
If you are being sued for a car accident but have no assets, your work income is in jeopardy of being garnished. However, current federal laws exist that cap wage garnishments at 25% of the disposable income of the person facing garnishment.
State laws may also provide protections of their own. For example, Massachusetts limits garnishment to 15%. Keep in mind that garnishment can continue well into the future and may continue until your entire judgment has been satisfied.
If you are a homeowner and are being sued for a car accident but have no other assets, your home may be in danger. It all depends on the amount of equity you have built up in your residence.
Under Virginia law, residents are currently afforded a $5,000 exemption with their homes. If the owner has dependents, they tack on an additional $500 for each one. Additionally, married couples who file jointly and individuals 65+ can also be exempt for up $10,000 or more.
In other words, your house is safe if you have a lawsuit judgment of $15,000 but have two kids and file jointly. The math would be $5,000 (automatic exemption) + $1,000 (two dependents) + $10,000 (married couple filing tax returns jointly) = $16,000 in exemptions.
Bankruptcy and Lawsuit Debts
Attaching someone’s paycheck and putting a lien on someone’s house seem like potentially viable plans, and they often are, especially when the judgments owed are not too high. However, in the case of significant car accident judgments, the person who must pay may decide to file for bankruptcy.
How Does Bankruptcy Affect a Car Accident Judgment?
Bankruptcies exist to give individuals and organizations a fresh start. It relieves them of many of their financial burdens, but not all of them.
For example, student loans and tax debt can not typically be discharged during bankruptcy proceedings. However, a lawsuit judgment for compensation from a car accident case can be made to go away by filing bankruptcy.
Avoiding Financial Nightmares from Car Accidents
The easiest way to protect your financial situation is to carry the appropriate amount of insurance, so you don’t expose your livelihood to financial judgments.
In many cases, insurance coverage is sufficient to handle the losses that car accidents generate, and the claim for compensation is resolved in the negotiation stage and without the need for a lawsuit.
When insurance is not enough and you find yourself being sued for a car accident but have no assets, you will at least have paid some of the judgment through your insurance, if you have it, before having to face the possibility of garnishment or home sale.
However, with no insurance whatsoever, you can be on the hook for the entire compensation payout.
The only other effective method of avoiding being sued with no assets is to drive as safely as possible. Although it is impossible to drive perfectly at all times, most drivers who take reasonable care do not cause accidents; they are more likely to be a victim of a car crash than the cause of one.
Whether you are being sued and don’t have assets or are suing someone in this situation, hiring an experienced car accident lawyer to handle your case is essential. They will help you understand the consequences of the legal actions you are contemplating and aid you in making the decisions most appropriate for your case.
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