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MAY 17, 2013

Texas Collection Laws

A collection agent is threatening to sue me for a bill I do not have the money to pay. What are my rights in Texas?

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Bill's Answer: Answered by Mark Cappel

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.

Wage Garnishment

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."

Garnishment of Social Security benefits or pensions for consumer debt is not allowed under federal law. Garnishment of Social Security and pensions may be allowed for child support.

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.

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 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.

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 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

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.

Recommendation

Consult with a Texas attorney experienced in civil litigation to get precise answers to your questions about liens, levies, and garnishment in Texas.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

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Comments (109)


Jennie W.
Haltom City, TX  |  May 17, 2013
My daughter has been receiving a debt collection since she was 16 years old from a phone bill in 1998 (she was 6 years old in 1998). Obviously the debt is not hers, and we suspect it was her biological father who fraudulently obtained a phone in her name/SSN, although the address that we lived at in Dallas was correct (He did not live with us - and we were in the process of a divorce). At the time we received the first collection letter, we checked her credit report and found of course that the debt was not on her credit report (it was a ten year old debt at that point). At that time, after consulting a credit expert, we determined that we would let the matter drop. We have since received letters on this collection every 6-8 months over the course of the past 5 years. We advised our daughter each time, and reminded her NOT to contact these people and to NOT pay them any money. Today she (now age 21) got the mail from the box and there was another letter and I guess she snapped. She called them (ugh) - they tried to get her to set up a payment plan, thank goodness she did not agree to it. She told them that she was 6 years old at the time this debt was incurred and that it was not her debt. She adamantly told them she would not now nor ever be paying this debt. They said they would file a dispute and send it up the chain. My concerns are many including:now she was has contacted them, will it go back on her credit report? I thought that disputes must be initiated by the person to whom the debt is being applied - so how is that THEY (the collection agency) can file one? BTW- contacting deadbeat ex-father is not possible - we don't know where he is, he will never admit to it anyway, and he has never paid a debt in his life. What do we do from here? I am trying to protect my daughter and her credit /scorereport.
Bills.com
May 20, 2013
The old debt should not reappear on her credit report. Of course, an unscrupulous collection agent could report it with a new, inaccurate date. I advise your daughter to get a free credit report every four months, from one of the credit bureaus, at www.AnnualCreditReport.com. If a creditor does report this account, she can dispute it with the credit bureau and have it removed.

I also suggest that your daughter send a cease communications letter to the creditor, if she receives any written communications from them, to stop the calls.
J L.
Cameron, TX  |  February 21, 2013
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?
Bills.com
February 21, 2013
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.
Matthew S.
Studio City, CA  |  January 07, 2013
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
Bills.com
January 16, 2013
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.
Kristy H.
China Springs, TX  |  August 16, 2012
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.
Bills.com
August 16, 2012
First, read the Bills.com resource How To Cancel ACH Payments to learn how to stop the withdrawals from your bank or credit union account.

Second, read the Bills.com article Payday Loans & Hot Checks in Texas to learn how to resolve payday loans.

Third, read Fake Debt Collector to learn more about the steps one can take when dealing with a scam artist.
Candy H.
July 14, 2012
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?
Bills.com
July 16, 2012
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.
Angie F.
Arlington, TX  |  July 03, 2012
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 :)
Bills.com
July 05, 2012
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.
Dave P.
Coon Rapids, MN  |  May 17, 2012
Can a collection agency pursue a 16 year old for a bill related to an ambulance ride? It took place in Texas.
Bills.com
May 17, 2012
Dave, in almost every state a collection agency can try to collect even on debts that have passed the statute of limitations.

I suggest that you validate the debt, if you just received written notice. You can use the statute of limitations as a defense, if you are sued, though you may want to speak with a lawyer to make sure that nothing took place that stopped the SOL from running.
Charles S.
Commerce, TX  |  April 18, 2012
I have a $3,500.00 judgment lien on a rental property in Texas placed by the attorneys representing an Ex-wife. The judgment was rendered in June of 2002 however the lien was filed in August of 2002. Barring any renewal of the lien, when should I be able to sell the property without proceeds going to cover the lien? Also, does the lien automatcally become inefective or do I need to file something with the county?
Bills.com
April 18, 2012
The lifetime of a judgment-lien in Texas is 10 years (Property Title 5, Subtitle B, Chapter 52). Consult with a Texas lawyer to make certain my interpretation of Texas law is accurate, and to learn how to remove a lien if its life has ended.
D S.
Porter, TX  |  April 17, 2012
My mother who lives in Texas and is almost 70 years old, received a call from a collector for a debt that is several years old. The credit card belonged to my father who passed away in 2002. My mothers name was on the account, when my father passed she sent them a death certificate as they requested. Now she is getting calls that her Social Security check will be garnished, and a lien be placed on her house. Please can you give me some advise, is this even legal for them to threaten her like this?
Bills.com
April 18, 2012
I can't give you legal advice, as only a lawyer can properly do so, but I will share a few thoughts.

The threats are improper. Her Social Security cannot be garnished for this kind of debt. I think that she should speak with a lawyer who handles cases involving violations of the Fair Debt Collections Practices Act. She should not pay a penny towards this debt. If she receives anything in writing from the collector, she should validate the debt.
Jael T.
College Station, TX  |  April 10, 2012
My accounts have all been frozen by an attorney's office that have court ordered their judgment against me. I don't have much money. And anything I do have I need to pay bills. I've talked to them twice and both times they claim that they will verify my funds with my credit union and call me back. They never do. I owe a bit over $10,000. They want me to make a large payment but I have $200 to my name. I want to make arrangements or do something, but they won't return my calls. My husband is about to get paid, but its too late to stop the direct deposit, which means we have no money to pay anything. I don't know what to do. We live in Texas though, so I know they can't garnish my wages. But what can I do at this point? How long can they freeze my account? Will I get in trouble if I stop the direct deposit (and how can I not when I have bills to pay)?
Bills.com
April 10, 2012
I know of no law requiring a person to deposit funds into an account that a judgment-creditor has placed a levy upon. My advice? Open an account at a different credit union or local bank.
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