What Happens If a Credit Card Sues You and You Have No Money

Being sued for credit card debt can feel hopeless — especially when you already can’t pay your bills. Many people assume that if they have “no money,” a creditor can’t do anything. Unfortunately, that’s not true.

Even if you don’t have the ability to pay right now, a creditor can still sue you, win a judgment, and use that judgment to collect. Whether you’re actually safe from collection depends on whether you’re collection-proof — meaning your income and assets are protected by law. Many people who have no disposable income after expenses can still be collected on by creditors.

In Virginia, being collection-proof can often temporary. Understanding how garnishments, bank levies, and property liens work is the first step toward protecting yourself.

What Does It Mean to Be “Collection-Proof”?

“Collection-proof” doesn’t mean a creditor can’t sue you — it means that even if they win, they can’t collect right now.

You may be collection-proof if:

• All your income comes from protected sources, such as Social Security, SSI, veterans’ benefits, or certain pensions.

• You don’t own non-exempt property, like a home with equity or valuable assets.

• Your wages are too low to meet garnishment thresholds.

However, this status can change overnight. If you start working again, deposit money into a bank account, or buy property, you could suddenly become collectible.

That’s why it’s important to have a plan before creditors get a judgment.

Federal Law: The Minimum Protection Every State Must Offer

Even though garnishment laws vary by state, federal law sets the nationwide minimum protections that every state must follow. These rules come from the Consumer Credit Protection Act (15 U.S.C. § 1671–1677).

Under federal law:

• A creditor can take no more than 25% of your disposable earnings, or the amount by which your weekly disposable income exceeds 30 times the federal minimum wage — whichever is less.

• “Disposable earnings” means what’s left after legally required deductions like taxes and Social Security, not voluntary deductions like health insurance.

• Employers cannot fire you for having one wage garnishment for one debt, but that protection doesn’t extend to multiple garnishments.

As of 2025, with the federal minimum wage still at $7.25/hour, this means at least $217.50 per week of your take-home pay is always protected — even in the strictest states.

Every state must follow this federal baseline, but they are allowed to offer stronger protections. Some states, such as Texas, Florida, North Carolina, and Pennsylvania, go much further by banning wage garnishment for most consumer debts altogether.

Virginia, however, only mirrors the federal standard and ties its exemption to the higher of the federal or state minimum wage — which means creditors in Virginia can garnish wages from anyone earning a modest paycheck.

Virginia’s Low Garnishment Threshold

Virginia law allows creditors to garnish the lesser of 25% of your disposable earnings or the amount exceeding 40 times the minimum wage.

With Virginia’s minimum wage now at $12.41/hour (as of 2025), creditors can garnish wages if your take-home pay is more than about $992 every two weeks. That means many people who consider themselves “broke” may still lose part of their paycheck to garnishment.

Living in Virginia means creditors have stronger collection rights (compared to many states), so ignoring a lawsuit can have real consequences.

Bank Garnishments: Why Your Account Isn’t Always Safe

Even if your paycheck isn’t high enough for wage garnishment, your bank account may still be at risk.

Once a creditor has a judgment, they can file for a bank garnishment (also called a bank levy). This allows them to freeze and seize the money in your account — often without warning.

A few important details:

• Exempt funds such as Social Security, SSI, VA benefits, and most retirement income are protected by federal law. However, if they’re mixed with other deposits, the bank may freeze the entire account until you prove which money is exempt.

• Wages already deposited in your account can lose their wage-garnishment protection — once they hit your bank, they’re typically treated as regular funds. Some judges/jurisdictions in Virginia may allow protections for wages that have been direct deposited into your bank account, but that typically requires a exemption hearing in state court (after filing a claim of exemption).

• If your account is frozen, you typically have only 10 days to file a claim of exemption with the court to get the protected money released.

To protect exempt income, it’s often best to keep government benefits in a separate account and avoid mixing them with other funds.

Judgment Liens on Homes and Property

If you own real estate in Virginia, a creditor can often place a lien on your property once they obtain a judgment.

Here’s how it works:

• A judgment automatically becomes a lien on any real property you own in the city or county if it is obtain in that location’s circuit court or filed in the jurisdiction’s land records. No additional notice must be provided.

• The lien doesn’t mean your home will be taken immediately — but it must be paid off if you sell or refinance. If the judgment is over $25,000.00, a creditor has certain rights to conduct a judicial foreclosure, but it is rare.

• In some cases, the lien may survive bankruptcy unless you take steps to avoid the lien during your case.

• A judgment in Virginia lasts at least 10 years and can be renewed for another 20 to 40 years (depending on the situation), which allows creditors to wait until you gain equity or sell the property.

Even if your house is protected by Virginia’s Tenants by the Entirety ownership or homestead exemption, a recorded judgment can still cause future title or refinancing issues or could become an issues at the time of divorce or death of a spouse.

What Income and Assets Are Protected

Virginia and federal law both protect certain income and property from collection. You may be collection-proof if your only income or assets fall into these categories:

Protected Income

• Social Security or SSI benefits

• Veterans’ benefits

• Unemployment compensation

• Child support and alimony you receive

• Most retirement and pension benefits

• Public assistance (SNAP, TANF, etc.)

Partially Protected Income

• Wages: Only part of your paycheck is protected (roughly $992 every two weeks in 2025).

• Self-employment income: May be garnished depending on how it’s received and whether it counts as “earnings.”

Protected Property

• Household goods and basic personal property up to a certain value.

• Qualified retirement accounts.

• Some home equity/wildcard property, if claimed properly with a homestead deed.

• Tenancy by the Entirety property (for married couples, when only one spouse owes the debt).

Knowing what’s exempt — and properly claiming it — is key. An attorney can help ensure you don’t lose protected income or property simply because of missed paperwork.

Why “No Money” Still Isn’t a Plan

Even if you’re collection-proof right now, a judgment gives creditors long-term rights. In Virginia, that judgment can follow you for decades, waiting for your financial situation to change.

We often meet clients who thought they were safe until:

• They got a new job and suddenly faced wage garnishment.

• A tax refund or new bank account was frozen.

• They sold or refinanced a house and had to pay off an old lien.

The best time to deal with debt is before it reaches judgment. Bankruptcy or debt resolution can stop lawsuits, prevent garnishments, and protect your future income.

What to Do If You’re Sued

1. Don’t ignore the lawsuit. Even if you have no money, failing to respond gives the creditor a judgment by default.

2. Check the validity of the debt. Old or purchased debts may not be legally enforceable.

3. Act early. Contact an attorney to discuss settlement, defense, or bankruptcy options before garnishment starts.

4. Review your situation. Determine if you are collectable and if there are any assets at risk.

Using Bankruptcy to Stop Lawsuits and Garnishments

One of the most powerful tools for stopping debt collection is the automatic stay that takes effect the moment you file for bankruptcy. The automatic stay is a federal court order that immediately typically halts all collection activity — including wage garnishments, bank levies, and pending lawsuits. Creditors must stop calling, writing, suing, or attempting to collect.

If your wages are being garnished, the garnishment stops as soon as your case is filed. In many cases, you might be able to recover funds garnished within the 90 days before filing. If a credit card company is already suing you, the lawsuit is paused instantly, and in most cases, the debt will be wiped out entirely in a Chapter 7 bankruptcy.

For those with higher income or non-dischargeable debts, Chapter 13 allows you to stop lawsuits and garnishments while repaying only what your budget allows — often just a fraction of what you owe. It’s especially useful for catching up on missed mortgage payments or dealing with tax debt alongside credit card balances.

Whether you file Chapter 7 or Chapter 13, bankruptcy doesn’t just stop collection — it provides a structured, legal path toward financial recovery, ensuring creditors can’t keep you trapped in an endless cycle of judgments and garnishments.

How Ashley F. Morgan Law, PC Can Help

At Ashley F. Morgan Law, PC, we help Virginia residents and small businesses stop creditor collection and protect their assets. Our team:

• Reviews your full financial picture to see if you’re truly collection-proof.

• Helps you claim the correct Virginia exemptions and stop wage or bank garnishments.

• Handles both bankruptcy and tax resolution in-house, offering realistic solutions for long-term relief.

• Represents you directly — no call centers or salespeople, just experienced local attorneys who understand Virginia’s unique exemption laws.

Whether you need to stop a garnishment, remove a lien, or discharge the debt entirely, we’ll help you build a plan that fits your situation.

Bottom Line: Be Proactive, When a Credit Card Sues You

Even if you have “no money,” a credit card judgment can still impact your future. In Virginia, the threshold for garnishment is low, and judgments can last for decades. Understanding what income and assets are protected — and acting before a creditor strikes — can make all the difference.

If you’ve been sued or threatened with garnishment, contact Ashley F. Morgan Law, PC for a free consultation. We’ll review your finances, explain your protections, and help you take back control.