A collection agent or law firm that owns a collection account is a creditor. A creditor has several legal means of collecting a debt. But before the creditor can start, the creditor must go to court to receive a judgment. See the Bills.com resource Served Summons and Complaint to learn more about this process.
The court may decide to grant a judgment to the creditor. A judgment is a declaration by a court that the creditor has the legal right to demand a wage garnishment, a levy on the debtor's bank accounts, and a lien on the debtor's property. A creditor that is granted a judgment is called a "judgment-creditor." Which of these tools the creditor will use depends on the circumstances. We discuss each of these remedies below.
The most common method used by judgment-creditors to enforce judgments is wage garnishment, in which a judgment creditor would contact the debtor's employer and require the employer to deduct a certain portion of the debtor's wages each pay period and send the money to the creditor. However, several states, including Texas, Pennsylvania, North Carolina, and South Carolina, do not allow wage garnishment for the enforcement of most judgments. In several other states, such as New Hampshire, wage garnishment is not the "preferred" method of judgment enforcement because, although possible, it is a tedious and time consuming process for creditors.
In most states, creditors are allowed to garnish between 10% and 25% of your wages, with the percentage allowed being determined by each state.
Texas Garnishment rules are found in Title 3, Chapter 63. Under CP § 63.004 "Except as otherwise provided by state or federal law, current wages for personal service are not subject to garnishment."
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.
If you reside in another state, see the Bills.com Wage Garnishment article to learn more.
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 Title 3, Subtitle A, Chapter 59. 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.
If you reside in another state, see the Bills.com Account Levy resource to learn more about the general rules for this remedy.
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 allows a lien for a money judgment under Title 5, Subtitle B, Chapter 51. Under Title 5, Subtitle B, Chapter 53, 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 Title 3, Chapter 24.
If you reside in another state, see the Bills.com Liens & How to Resolve Them article to learn more.
Texas Statutes of Limitations
Each state has is own statute of limitations regarding debts. Under Texas law, the statute of limitations is governed by Title 2, Subtitle B, Chapter 16 on an open account (i.e., credit card) is four years, written contracts have a four year statute of limitations; real property and foreclosure actions must commence within four years and the deficiency balance within two years of the foreclosure sale. 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.
See the Bills.com resource Texas Statute of Limitations to learn more about this issue.
Texas foreclosure laws are found in Title 5, Subtitle B, Chapter 51, Section 003 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 Texas Mortgage Deficiency Balance to learn more.
Texas Payday Loan Collection
See the Bills.com resource Payday Loans & Hot Checks in Texas to learn how Texas law protects consumers of payday loans.
Consult with a Texas attorney experienced in civil litigation to get precise answers to your questions about liens, levies, and garnishment in Texas.
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