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Texas Collection Laws

Texas Capitol | Texas Collection Laws

Updated: Jun 18, 2014

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.

In 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).

Collection 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.

See the Bills.com article to learn more about your potential liability for your Texas spouse's debt.

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.

4.5
/5.0
(34 Votes)

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127 Comments

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  • AF
    Apr, 2014
    Abigail
    In May 2013, I was awarded a judgment in the civil suit I filed against my former acting coach for breach of contract. After 30 days of no payment, nor any attempt to contact me to set up payment, I filed an Abstract of Judgment against his home. Again - no payment; he is just totally ignoring me. I have been reading about Writs of Garnishment and Writs of Execution. From what I can tell, I'll need an attorney to help me with these. The property that the Abstract of Judgment is attached to is homesteaded (per his wife). She is threatening me that if I don't take it off, she will hire an attorney and I'll also have to pay her costs for his services. Is this true? Is the Writ of Garnishment or Writ of Execution a viable path to try and secure payment or would I be paying an attorney for nothing? It doesn't seem fair, or even logical, to have a system for taking someone to small claims court if they can legally ignore the judgment and all the laws protect the debtor. Why even have a small claims court if it has no way to enforce its judgments? I am totally frustrated. Is there anything I can legally do to secure what the court awarded me?
    0 Votes

    • BA
      Apr, 2014
      Bill
      Civil procedure law is full of precise, rigid rules. When it comes to collecting on a judgment, which the law calls "remedies," the civil procedure rules are even more exact. Breaking one of these rules can scuttle all of the work and money you put into obtaining a judgment. That is why it pays to hire a lawyer who has remedies experience when collecting a judgment.

      I do not know for certain if Texas allows judgment-creditors to put a lien on the homestead of judgment-debtor's spouse. It would be not helpful for me to express my guess. Consult with a Texas lawyer who has remedies experience.
      0 Votes

  • AL
    Mar, 2014
    Al
    I have a judgment from credit card debt that was awarded by default in California. I was never officially served but when I looked up the law to dispute this i believe the SOL has already gone up. Since the judgment was issued it been nearly 9 years and since fallen off credit report a couple of years back. I moved to San Antonio, Texas over 4.5 years ago. I just received a letter from a collection agency trying to collect this judgment at the judgment amount at the time of lawsuit/charge off. They're offering 80% or $6.3k of the original debt $8k in the initial letter of now the 5th agency. Its my understand that unsecure debt since I'm living in Texas, can't garnish wages, car or home. I don't own a home and the car I have is being paid off. My question for you is, is this a debt I should pursue to attempt to settle if I could pay in full up to 50% not 80% being offered/asked for or given Texas law and the age of the debt should I continue to wait it out? Any advice as to what one might do in the case?
    0 Votes

    • BA
      Mar, 2014
      Bill
      You have a tricky situation. My first and last thought here to recommend you consult with a Texas lawyer before you take any action.

      You mentioned you were never given notice of the lawsuit, and as a consequence lost by default. Consult with a lawyer about the idea of filing a motion to vacate the judgment based on an ineffective service of process.

      Regarding the California judgment, those have a 10-year lifespan in California, but can be renewed an additional 10 years. You mentioned the judgment was issued 9 years ago. If the judgment-creditor sits on its rights and does not renew the judgment, it will expire in a year or so.

      One option for the judgment-creditor is domesticating the judgment in Texas, which Texas allows. Once domesticated, the judgment has a 10-year life in Texas. It is possible for an aggressive judgment-creditor to pursue you for this debt for another decade.

      One option is to negotiate a settlement. It's likely the collection agent bought the judgment for pennies on the dollar, so you can be really sharp in your terms when negotiating a settlement. Involve a lawyer with your negotiations to make sure the judgment-creditor's offer is a final settlement of the judgment.
      0 Votes

  • TM
    Feb, 2014
    T.
    My husband has significant federal student loan debt ($390,000 before any additional interest accruals). We've always resided in Texas, but were married in Las Vegas. Currently, he is preparing to complete the process for loan consolidation through Direct Loans (from Nelnet. I am not a co-signor on any of the debt, nor do I plan to be a co-signor on the consolidated debt. It's my understanding that, given that we reside in a community property state, I can still be liable for this debt (upon his default and/or death). Note that there will, very likely, be no estate, if he were die because we don't really have anything except a small home, our cars and a few personal belongings. My question is regarding what exactly are the Texas "exceptions" for the surviving spouse being responsible for student loan debt (upon default, more particularly death, given that my husband is up in age and not in the best of health). In any case, I've searched the internet for some time and have not be able to locate the "list of exceptions" in Texas, relative to cancellation of debt when the borrowing spouse becomes deceased or in default? Another question....I believe I correctly understand that in the event of debt forgiveness or debt cancellation any cancellation of debt income accruing to the borrowing spouse, the non-borrowing spouse can shield him or herself from being personally responsible for the tax liability on such debt cancelation by just filing married filing separately. Correct?
    0 Votes

    • BA
      Feb, 2014
      Bill
      Consult with a Texas lawyer who has estate planning experience. In your husband's case, he has a large debt and should he die in the near future, his heirs may have some liability for some of his debts.

      You mentioned a Direct Loan consolidation, which leaves a clue all or part of the $390,000 student loan debt is federal. The good news for federal loans is most are discharged when the borrower dies.

      The story is more complicated for most private and some state student loans. It is likely any private student loans need to flow through the probate process. If you are a co-signer on any private student loans, it is likely you would still have liability for the debt upon the other co-signer's death. You mentioned residing in Texas, which is community property state. I have seen arguments that surviving spouses in CP states have liability for private student loans, but I do not know how Texas high courts have answered that question.

      Regarding your tax questions, these are best answered by a wills, trusts, and estate planning lawyer who can analyze the facts in your case. Regardless of your spouse's health or amount of debt, it is usually a good idea for couples to create an estate plan to avoid estate taxes, and clarify the ownership of their real property.
      0 Votes

  • MG
    Jan, 2014
    Marsha
    I have a judgment against the Austin Police Department for the illegal towing of my vehicle. The judgment was issued by JP, Precinct 3, Travis County. I have called many departments with the City of Austin, but no-one can tell me how to collect on this judgment. Help?
    0 Votes

    • BA
      Jan, 2014
      Bill
      If the size of the debt you're trying to collect is not large enough to merit hiring a lawyer experienced in debt collection, then here are two suggestions:
      1. Contact City Manager Marc Ott. You can email him using this form or phone his office at 512-974-2200.
      2. Contact the City of Austin's Social Media pages. Making it a public issue may help you get an answer. You can Tweet them or comment on their Facebook page.
      0 Votes

  • BS
    Dec, 2013
    bill
    I always lived in Texas. Had file bankruptcy however could not get original account number from discover and used the debt collection account number. It's been ten years since I sent a payment, eight years since my bankruptcy was finalized. I am now receiving a letter from attorney collector who stated they have just been obtained by discover to collect 32k and are threatening lawsuit etc... shouldn't the SOL been way over now? I spoke to my bankruptcy attorney and he stated don't worry wait for it to go a way. Do I need to worry?
    0 Votes

    • BA
      Jan, 2014
      Bill
      I agree with your lawyer that you should not worry.
      0 Votes