Texas Collection Laws

Bills.com Team
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Highlights


  • Review the means available to a creditor to collect on a judgment in Texas.
  • Understand that wages in Texas are usually safe from garnishment from an unsecured creditor.
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Learn Texas's Rules For Garnishment, Liens, and Foreclosure

If you owe debt and reside in Texas, it is important to understand your rights and liabilities. It is even more important if a creditor threatens to file a lawsuit against you.

A lender, collection agent or law firm that owns a collection account is a creditor. Texas law gives creditors several means of collecting delinquent debt. These methods include wage garnishment, account levy, and, in some cases, seizing personal property.

Before a creditor may use these legal tools in Texas, the creditor must go to court to receive a judgment against you. See the Bills.com article to learn more about this process, and how to fight a lawsuit.

A court will hold a hearing after a creditor files a lawsuit. A hearing may result in a judgment awarded to the creditor. A judgment is a court’s declaration the creditor has the legal right to demand:

The laws calls these remedies. A creditor granted a judgment is called a judgment-creditor. Which tool a judgment-creditor may use depends on the circumstances and Texas law. We discuss each of these remedies below, plus these rules and issues Texas consumers need to know:

Texas Wage Garnishment

The most common method used by judgment-creditors to enforce judgments is wage garnishment. A judgment-creditor contacts your employer and requires the employer to deduct a certain portion of your wages each pay period and send the money to the creditor.

n most states, creditors may garnish between 10% and 25% of your wages, with the percentage allowed determined by state law. Garnishment of or for consumer debt is not allowed under federal law, but may be allowed for child support. See the Bills.com article to learn more.

Texas Garnishment rules are found in . Under CP § 63.004 “Except as otherwise provided by state or federal law, current wages for personal service are not subject to garnishment.” In other words, Texas outlaws wage garnishment for most debts, but not for delinquent child support, tax, or federal student loan payments.

Generally speaking, 401(K) or other retirement funds are exempt from garnishment. It is advisable to have those funds deposited into a separate bank account to ensure financial accounting if you are concerned about garnishment on those payments.

Texas Account Levy

A levy means that the creditor has the right to take whatever money in a debtor’s account and apply the funds to the balance of the judgment. Again, the procedure for levying bank accounts, as well as what amount, if any, a debtor can claim as exempt from the levy, is governed by state law. Many states exempt certain amounts and certain types of funds from bank levies, so a debtor should review his or her state’s laws to find if a bank account can be levied. In some states levy is called attachment or account garnishment. The names may vary but the concept is the same.

In Texas, a levy or attachment is allowed under . Levy is allowed if the plaintiff possesses a legal instrument such as a notice of levy commanding the financial institution for a claim against the account. Texas offers many exemptions for consumers:

  • Homesteads: Generally 100% exempt, except for:
    1. Purchase money liens
    2. Mechanic’s and materialman’s liens for work on that property
    3. Taxes
    Urban homesteads shall not exceed 10 acres and rural homesteads 200 acres for a family, or 100 acres for a single adult.
  • Automobiles: Generally 100% exempt from the claims of third party creditors.
  • Pensions and retirement accounts
  • Tools of the Trade: Tools, equipment, books, machines used in a trade or profession.
  • Jewelry: Not to exceed 25% of the dollar limit for personal property, which is $60,000 for a family, $30,000 for a single adult.
  • Home furnishing, heirlooms, food farming and ranching vehicles, firearms, sporting equipment and certain animals.
  • A dollar cap on exempt personal property: $60,000 for a family and $30,000 for a single adult.
  • Workers' compensation claims (Texas Labor Code 408.201)

See to learn more about the exemptions in the Lone Star State. If you reside in another state, see the Bills.com resource to learn more about the general rules for this remedy.

Texas Lien

A lien is an encumbrance — a claim — on a property. For example, if the debtor owns a home, a creditor with a judgment has the right to place a lien on the home, meaning that if the debtor sells or refinance the home, the debtor will be required to pay the judgment out of the proceeds of the sale or refinance. If the amount of the judgment is more than the amount of equity in your home, then the lien may prevent the debtor from selling or refinancing until the debtor can pay off the judgment.

Texas lien law is tricky and tipped in favor of consumers. Texas allows a lien for a money judgment under . Under , mechanics and contractors (and similar laborers and professionals) a have the right to place a lien on a property. This also includes creditors for unsecured debt (credit cards, auto loans, and so on), see Texas law .

Texas homeowners can protect their residence by filing a homestead declaration. A Texas homestead is not a flawless shield against creditors, however. A homestead is not exempt from liens, but is exempt from any seizure or forced sale attempting to enforce the lien (Exocet, Inc. v. Cordes, 815 S.W.2d 350, 352 (Tex. App. ? Austin 1991, no writ)).

If you reside in another state, see the Bills.com article to learn more.

Texas Statutes of Limitations

Each state or commonwealth has its own statute of limitations on civil matters. Here are some of Texas’s statute of limitations for consumer-related issues:

Account/Type Years Statute
Texas statutes of limitations. Source: Bills.com
Credit card 4
Spoken contract 4
Written contract 4
Mortgage contract 4
Promissory note 6
Judgment 10*
* Can be renewed () A non-Texas judgment may be domesticated in Texas (Tex. Civ. Prac. & Rem. Code § 35.003 and § 16.066)

When the statute of limitations clock starts depends on the circumstances and the particular statute. In most states, the clock starts after the cause of action accrues. Texas follows the general rule (Texas Civ. Prac. & Rem. Code § 16.004(a)). The clock may be paused (called "tolled") under some circumstances, or renewed (Texas Civ. Prac. & Rem. Code § 16.063).

ollection agents violate the if they file a debt collection lawsuit against a consumer after the statute of limitation expired (Kimber v. Federal Financial Corp. 668 F.Supp. 1480 (1987) and Basile v. Blatt, Hasenmiller, Liebsker & Moore LLC, 632 F. Supp. 2d 842, 845 (2009)). Unscrupulous collection agents sue in hopes the consumer will not know this rule.

See the Bills.com resource if you reside in another state.

Texas Collection Agent Laws

When a debt collector tries to collect a debt from a Texas resident, it must comply with both and the federal . A violation of the Texas law may result in criminal or civil penalties. A violation of Texas Title 5 Chapter 392 is also a violation of the Texas Deceptive Trade Practices Act, which provides for triple money damages in certain circumstances.

Collection agents need not be licensed in Texas or their home state. A collection agent collecting in Texas must file a $10,000 surety bond with the Texas secretary of state before engaging in debt collection. The secretary of state offers a form consumers can use to learn if the collection agent contacting them filed a bond properly. if a debt collector or credit bureau violated Texas Chapter 392 by engaging in a false, misleading, or deceptive practices.

Spousal Debt in Texas & Community Property

Texas follows the common law doctrine of necessaries. This means each spouse is legally liable for the expenses necessary to support the other spouse. Examples of necessary expenses include required medical care, shelter, and food. Parents are legally liable to support their minor children.

Texas is a community property state. This means that Texas presumes property purchased, wealth created, and debts incurred while married are community property. However, Texas recognizes separate property acquired before and during marriage. Generally, pre-marital debt is considered "separate property" and does not become community property automatically upon marriage. Community property rules can be tricky and altered by pre-nuptial agreements, so consult with a Texas lawyer who has family law experience if you have a question about Texas family law.

Texas Foreclosure

Texas foreclosure laws are found in to learn more about the rules surrounding foreclosure in this state, including deficiency balances (Property code § 51.003-51.005). Texas has no anti-deficiency rule. See also the Bills.com resource to learn more.

Texas Payday Loan Collection

See the Bills.com resource to learn how Texas law protects consumers of payday loans.

Recommendation

Consult with a Texas attorney experienced in civil litigation, consumer law, or bankruptcy to receive precise answers to your questions about liens, levies, and garnishment in Texas.

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107 Comments

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  • JL
    Feb, 2013
    J
    I had a judgment entered against me in 2003 in Dallas County Texas. On my credit report, it says it is scheduled to fall off my record in 9/2013. I recently received a notice in the mail from a new creditor, trying to collect money for their customer who are the ones that originally filed judgment on me. Does this mean they sold the debt to a collection agency? If so, can the firm that filed judgment against me still try to collect any money owed? For example, try to levy my bank account. Also, since the debt is so old (2003), is there much the new collection agency can do to collect?
    0 Votes

    • BA
      Feb, 2013
      Bill
      A Texas judgment is valid for 10 years from the date of recording. This can be renewed another 10 years for as long as the judgment is unpaid.

      A judgment-creditor is allowed to sell a judgment to someone else. This is called an assignment, and the "someone else" who usually buys judgments are collection agents. Whoever possesses the right to collect on the judgment may do so. See the original answer above to learn about the Texas rules for liens, account levies, and wage garnishment.

      The collection agent may use whatever legal means Texas law allows to collect the debt until the judgment expires. However, as I mentioned, the judgment owner has the right to renew the judgment before it expires. Consult with a Texas lawyer who has consumer law or bankruptcy experience to learn more about your rights as a Texas resident.
      0 Votes

  • MS
    Jan, 2013
    Matthew
    In Texas, first lender forclosed, second secured lender got nothing. Can 2nd file for Deficiency Judgment? and if so, when does statute of limitations run out (2 years, 4 years from forclosure, or four years from payoff due date of the Second? Thank you
    0 Votes

    • BA
      Jan, 2013
      Bill
      I have not researched Texas case law on this matter, so the observation I offer here is incomplete.

      Texas Title 5, Subtitle B, Chapter 51 concerns Texas' foreclosure and deficiency law. Texas statutes do not distinguish between junior and senior mortgages or deeds of trust regarding foreclosures and deficiency balances.

      You asked about the statute of limitations for collecting a Texas deficiency. In Section 51.003, we find the following:
      If the price at which real property is sold at a foreclosure sale under Section 51.002 is less than the unpaid balance of the indebtedness secured by the real property, resulting in a deficiency, any action brought to recover the deficiency must be brought within two years of the foreclosure sale and is governed by this section.
      As mentioned at the start of my comment, my answer is incomplete. Access a Texas Shepard's Citations or online equivalent to learn how Texas courts have decided the junior deficiency judgment and Sec 51.003 issues.
      0 Votes

  • KH
    Aug, 2012
    Kristy
    I have several defaulted payday loans and have been receiving scam/phishing calls for a year now from foreigners telling me I applied for this or that and providing my personal information. Some of the callers who are almost all with foreign accents tell me that if I don't return their calls, I will only be wished good luck and that of my life and my child. I reported some of the numbers to the IC3, FBI, local police department, BBB, and my state attorney general's office. My banking institution told me that the fine print in the contracts say that my personal information will be sold and in fact I have had money drafted from my account from companies that were not authorized. I refuse to pay any company now as I am afraid I am being scammed and I do not know what companies to trust. I am fearful that I will be sued for the loan defaults. Is there a company that will allow me to consolidate my payday loans only or mediate on my behalf. I honestly don't know what companies/phone numbers and representatives I can trust.
    0 Votes

  • CH
    Jul, 2012
    Candy
    I was contacted about about a debt that I know was last paid on in 6/2006 if that late (I was injured & suddenly making about 1/10th of my salary). I pulled my credit reports 8/11 and all 3 had no negative posts on them after working very hard to pull myself out of the mud. Then I got a call from a debt collector yesterday claiming she was going to file a civil suit over a $1000.00 CC bill that has now grown to over $2200.00. She said that she had gotten one of the credit bureaus (it kept changing which one) to accept the debt from 2002-2007. Again, I pulled all 3 & all positive. She claimed she would file first that evening, then Monday morning, and to have my lawyer call her. They are rated "F" on the BBB site - so how do I know this is for real or not? If it is, does the SOL protect me, as I am a severely disabled senior citizen & the only money in my bank account is from SS. Is that protected as it is auto-deposited?Or can my account be frozen?
    0 Votes

    • BA
      Jul, 2012
      Bill
      This sounds like a scam. While the collector can file suit against you, you can use the statute of limitations as an affirmative defense.

      My guess is the collector is trying to intimidate you into paying and will not file suit, once you make it clear that you are not going to pay and have an understanding of your rights.
      0 Votes

  • AF
    Jul, 2012
    Angie
    Hello, I recently have a judgment on me (even though I have yet to receive the paperwork) I have an active bank account which I know can be seized, however the only money that I receive from this account is money that is either being deposited from Unemployment and my tuition money from Financial Aid at my school. Can the debt collector touch that money? Am I protected? Please advise. Thank you Bills :)
    0 Votes

    • BA
      Jul, 2012
      Bill
      Levy of a financial account is allowed under Texas Title 3, Subtitle A, Chapter 59. However, there are many exemptions available to Texas residents (Texas Property Code Title 5, Subtitle A, Chapter 42). I am unable to find a statute that protects unemployment benefits or grants for tuition from account levy. That does not mean they are unprotected completely. The problem is a practical one: If the judgment-creditor does not give you notice of a pending levy, and seizes the amount in your account, it may take you time and money to get the money returned. I hate to advise this, but in this situation, your safest course of action is to move the unemployment benefit and financial aid funds to another person's account. You must be able to trust this person will not be tempted to dip into your funds. Alternatively, take the student aid money out as cash and place it in safe-deposit box so it is secured and you are not tempted to spend it on non-school items.
      0 Votes