When deciding whether to sue a person or entity, you must be aware that the person or entity may not be able to pay a judgment awarded by a court or may be able to avoid paying the judgment, even if it has the means to pay. A resounding victory in court is utterly worthless if the opposing party is “judgment proof” because it has no assets, little equity in a home or other real property, minimal personal property, no job or source of income, etc. Similarly, even if a party has enough assets to satisfy the judgment, it can hide the assets. Also, a party can file for bankruptcy and be discharged from many of its debts, including most types of civil judgments, leaving a party to fight in bankruptcy proceedings for recovery. Many parties use the threat of bankruptcy as leverage to attain a favorable settlement agreement outside of court.
However, although parties who go bankrupt t are ones that will likely have difficulty finding funds to repay debts, bankruptcy does not legally free a party from all debts and civil judgments. Federal law explains that a bankruptcy does not discharge certain debts, including but not limited to debts for: