Texas Collection Laws

Texas Capitol | Texas Collection Laws

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In this article:
  • 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.

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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167 Comments
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  • 35x35
    Carla Stauter,
    Jul, 2020

    I have been awarded a judgment, and writ of garnishment in the state of Oklahoma. However, the individual lives and has his account in Texas. How can I find a Writ of Garnishment form for the state of Texas? Furthermore, can I simply have a process server serve the bank with the Writ of Garnishment. The garnishment is on the bank account.

    • 35x35
      Daniel,
      Jul, 2020

      Carla, I am not a lawyer so the information I share is not to be taken as legal advice.

      You need to domesticate the judgment in Texas before you can take collection efforts against your judgment-debtor in a bank account in that state. Here is a lengthy piece on domesticating judgments in Texas. Read the beginning and you will see that there is more than one way to proceed. I recommend you speak with a lawyer in Texas that specializes in collecting debts, unless the size of the judgment is so small that hiring someone to assist you makes no sense. If that is the case, contact the court clerk at the area in Texas that is closest to you, as you may have to go to court yourself.

  • 35x35
    Stephanie,
    Jun, 2020

    How do collection agencies levy your account? I am in Texas and just wondering how they can take funds from your checking or savings account, do they have a system to track your bank accounts? Also how can take your money just like that? What if you have a mortgage payment, car payment, utilities and groceries how can thet just take what funds you have and then be left with nothing to pay your house, car, light, water etc.?

    • 35x35
      Daniel,
      Jul, 2020

      Stephanie, I am not a lawyer, so what I share is not to be considered legal advice.

      It depends who took money from your account. There are diffrent rules for the IRS, if you owe them money, then if I make a loan to you and you don't pay me back. For most creditors, they have to sue you and win a judgment against you. Then, they can search in various ways to find out where your account exists. If they locate your bank, then they get a bank garnishment. They don't care that you can't pay your other bills, as they are concerned about you paying them what you owe them.

  • 35x35
    Pat,
    Jun, 2020

    A credit card debt collector, PRS, won a default judgment against me about a year ago. I've never communicated with them. I'm 4 payments away from paying my car off with Toyota. My question is, can PRS intercept so that I don't get the title to my car once it's paid in full?

    • 35x35
      Daniel,
      Jul, 2020

      Pat, I am not a lawyer and can't give legal advice. I will share some infomration with the understanding that it is not legal advice.

      Texas has some strong consumer protections in place. Judgment-creditors can't garnish paychecks, for example. You are allowed one vehicle that is exempt from collections. I don't believe they can come after your car if that is your only car.

  • 35x35
    Nicole,
    Jun, 2020

    I am in Texas. A “board of attorneys” left a message with my relative for me to call them. It was about a loan from The Cash Store that I took out for $400 over 10 years ago. They say I now owe over $4,000 because it went to multiple collection agencies and that they are issuing a lien. I own no property but recently re-opened a bank account at the same bank I formerly used and had a pretty good chunk saved. I immediately went to the bank and withdrew my savings. What exactly do they mean by “lien” and should I be worried about having my money in the bank? I wasn’t able to finish paying the loan at the time but $4,000 is impossible, I stay at home to care for my disabled son now. I also worry because I am a trust beneficiary.

    • 35x35
      Daniel,
      Jun, 2020

      Nicole, I am not a lawyer, so can't give legal advice. I will share some information with the understanding that it is not to be considered legal advice.

      If you defaulted on the debt 10 years ago, the statute of limitations (SOL) on debt in Texas has passed. That means if you are sued, you could use the SOL as a defense. There are actions you could take take that restart the clock on the SOL, such as making a payment on the debt, so don't give them a penny. There are also actions that can stop the clock from running on the SOL, such as moving out out of the country.

      My guess is that the collection attempt was an effort to scare you into paying. If I were in your situation, I would not have paid. Be careful what you say to them, if they call again. 

      I commend you for removing funds from the bank account. A creditor you owe money for a debt on which you defaulted has to sue you to come after your income or bank account. The rules are different for a bank you owe money to for one debt but hold funds in another account. If you owe a bank and open a new account, it could very well be that the bank asserts its "right of offset." This gives them power to take money from one account to cover the delinquent debt in another account with the same institution. Given the fact that there must be other banks (or credit unions) at which you can open an account, I see no reason to risk that exposure. I would open an account at a different place. 

  • 35x35
    nan,
    Jun, 2020

    I had a credit card that I decided to pay off when I had some extra money, I paid the full amount my statement said was due before the due date. That gave me a zero balance. When the due date rolled around naturally I thought the card was paid in full, so didn't worry about it. One day, I go to use the card at the store and it is declined. The credit card company had canceled my account, telling my I had missed my payment and still owed them 100 in interest. I told them I had paid them in full before the next billing cycle. They still insisted I owed them one hundred in interest from the time of the last billing statement to the point I paid them. They have placed it on my credit report as default and now have me owing them over 200. I don't understand this as I paid the full balance before the due date. Then they cancelled my card. Do I still owe them or not?

    • 35x35
      Daniel,
      Jun, 2020

      Nan, I am not a lawyer. I will share some information with youas long as you understand that I don't give legal advice.

      From what you described, you should not owe anything. Are you sure they got payment before the due date? I can't picture a credit card company telling you that a payment in full before the due date on a card that has a grace period will result in charges. so they must not think you paid in full on time. See if you can prove when the payment was made. 

      At the same time, try to get from them a clear statement on when they received the payment and how they are calculating the interest.

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