Texas Collection Laws

Texas Capitol | Texas Collection Laws

Highlights

  • Review the ways a creditor can collect on a judgment against you in Texas.
  • Understand that wages in Texas are usually safe from garnishment from an unsecured creditor.
  • Learn the statute of limitations on debt in Texas.
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Learn Texas's Rules For Garnishment, Liens, and Foreclosure

If you owe debt and reside in Texas, it is crucial 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 a 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 Served Summons and Complaint 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 law calls these remedies. A creditor granted a judgment is called a judgment-creditor. Which tool a judgment-creditor uses 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 specific portion of your wages each pay period and send the money to the creditor.

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)
Wage Garnishment: How Big a Bite?

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

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).

Protect Yourself from Creditor Harassment
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.

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  • 35x35
    Feb, 2020
    Ann

    Hello. A year ago I needed a vehicle to get to work, so I had to make a financial decision. I stop paying one of my very high interest credit cards owing $5000. I'm middle aged and barely making it paycheck to paycheck. I'm from Texas. I don't own anything. What can the creditors do to me? I don't want to wind up homeless. I can't afford a lawyer either.

    0 Votes

    • 35x35
      Feb, 2020
      Daniel

      Ann, I am not a lawyer so you must not consider what I share legal advice.

      A credit card issuer can sue you for defaulting on the debt. If you are sued, it will likely result in a judgment against you. IIncome is protected from garnishment in Texas, though there can be exceptions such as a Texas resident that recieves income from a payroll office located in a different state. 

      The major risk you face if there is a judgment is that your bank account could be hit. If sued, appear in court, then take defensive action to keep funds out of your account and do not have your name listed on anyone else's account, as funds in ANY account on which you are an account-holder can be hit.

      0 Votes

  • 35x35
    Feb, 2020
    Carla

    What if you have medical issues and just started working but, due to monthly expenses and medical bills, can't afford to pay a credit card judgement that was just filed by a collection agency?

    0 Votes

    • 35x35
      Feb, 2020
      Daniel

      Sherri, I am not a lawyer so you must not consider my answer to be legal advice.

      It is not clear to me if a judgment exists or if you have been sued and expect a judgment. If the latter, go to court and have clear records to present the judge about your medical hardship and the costs. That doesn't prevent a judgment but could affect how the judgment is collected. If an order is in place that will result in a wage garnishment that leaves you uable to pay for your ongoing medical treatment or your neceessary living expenses, consult with a bankruptcy lawyer, as filing for bankruptcy would proect you from collection actions by the judgment creditor.

      0 Votes

  • 35x35
    Jan, 2020
    Alberto

    I am 66 yrs. old & receive a direct deposit pension from the Teacher Retirement System of Texas. I will soon have to appear in court concerning a summary judgement over a credit card debt. What is the worst case scenario I face? Lien on my home? Should I close my checking Acct?

    0 Votes

    • 35x35
      Jan, 2020
      Daniel

      I am not a lawyer, so the information I share is not legal advice. 

      Texas doesn't allow wage garnishment for this kind of debt. A bank garnishment is allowable. While Social Security benefits retain protection when directly deposited into a bank account that is subject to garnishment, with the dollar amount equal to two months the Social Security award, that doesn't apply to pensions as a rule. It is worth checking with the pension administrator for your pension to see if it is protected. If not, a defensive strategy of not having money exposed to seizure is wise.

      If the creditor files a lien against your primary residence, it won't lead to seizure of the property, according to Texas law. There is also a process for removing a lien in Texas, so creditors often don't bother, though they are permitted to do so.

      0 Votes

  • 35x35
    Jan, 2020
    Sharon

    Hi, Me and my boyfriend live together, and we also have a joint bank account. My boyfriend use to live in California years ago. California has a state law that even thou you do not still live there, that you have to pay California state income tax. He has been living in Texas since 2004 as a resident of Texas, and never went back . He was not aware of this law, and they ceased our banking account, and wiped us out. I have never even been to California in my life, and do not owe them anything, they garnished my money also. What can I do about this? Would really appreciate a response. Thank you.

    0 Votes

    • 35x35
      Jan, 2020
      Daniel

      Sharon,

      It sounds to me that your boyfriend neglected to let CA know that he is no longer a resident and had established residency elsewhere. That alone doesn't mean a person can't owe CA State income taxes.

      Is the company he works for based in Texas? That would make it simpler to straighten out.

      He needs to call the California Franchise Tax Board Taxpayer's Advocate. 2004 is a long time ago, so far back that he may not have any records from then. He should contact whomever he worked for and the landlord where he lived. The goal is to get some proof or a written declaration that he was in Texas. Maybe a medical record or a bank that, while unable to supply bank statements that far back could attest to the fact he opened an account and the address he used. A utility company may have records.

      I believe if you can prove that he was not subject to taxes in CA, the money will be returned to you and to him. If they feel he owes the money, then any money in the account was subject to seizure, even though you are not responsible for the debt.

      Until the matter is resolved, if there is stiill a debt owed in the eyes of the CAFTB, the bank account can be hit again. Any account with your bf's SSN on it is at risk.

      Please report back on how things go. Good luck!

      0 Votes

  • 35x35
    Jan, 2020
    Gary Coates

    Hi, my name is Gary from Corpus Christi. I took out a car loan 1998 and the gave the vehicle back to the lender after the car broke down to the point of inoperable,out of warranty, and I could not pay the balance of approx. $5000. I understand Texas statute of limitations is (4) years after the debt became delinquent. The law firm that is trying to sue me claims the statute has extended from 2015 when they claim to have contacted me. I do not recall this. I never received a summons and they claim they can garnish my bank accounts (1) is in only my name (which I receive direct deposit social security benefits and income from my part time job) and the other account is in both my partners and my name. My partner in no way was involved in this loan. Can I countersue them for attempting to collect a time-barred debt?

    0 Votes

    • 35x35
      Jan, 2020
      Daniel

      If a law-firm did not sue you already, then they have no authority to garnish a bank account. Sounds like they may be trying to scare you into paying them. It is also illegal to make threats (which is different than stating an action one is about to take).

      I am not certain there is a violation, but a good way to check is to contact an attorney that handles violations of the FDCPA (Fair Debt Collection Practices Act). They don't charge you a fee but will take the case if they feel they can win and get money from the creditor harassing you. Do a search online for FDCPA attorney and the name of the city in which you live.

      Please report back on how things go for you!

      0 Votes

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