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 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.

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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 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).

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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141 Comments

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  • 35x35
    Jan, 2019

    I have a civil suit filed against me in Georgia. I have been living in Texas for 2 years now. If this suit goes sideways and I get a judgement passed against me. What should I be concerned about: 1. Wage Garnishments - As far as I understand wage garnishments are not allowed in Texas for civil suits 2. Account Levy - I do have 2 accounts in National banks. I will be considering moving the funds given how the situation unfolds 3. What if the judgment is domesticated? - What concerns should I be worried about? Other than above can you suggest other matters to think about? Thank you

    0 Votes

    • 35x35
      Jan, 2019
      Daniel

      I can't give legal advice, as only an attorney can properly do so. Here are a couple of thoughts, with the understanding that I am not giving you legal advice.

      Texas doesn't allow wage garnishments for most debts. The length of time you've resided in Texas should make Texas law apply. If you were still receiving pay from a payroll office in Georgia, that could still place your income in jeopardy.

      Any bank account with your SSN tied to it is at risk. Taking precautionary action seems prudent. Whether a creditor can compel you to divulge where you are holding your money is up to the court. 

      A further step you could take is to speak with an attorney. This would give you an authoritative answer to your concerns, including an assessment of what is the standard practice regarding asset seizure in the county in which you live. 

      0 Votes

  • MD
    Oct, 2018
    M

    If I reside in Texas and have a bank account in another state, which state's rules apply to a levy?

    0 Votes

    • 35x35
      Oct, 2018
      Daniel

      I can't give you legal advice, as only a lawyer may properly do so. I will share some thoughts, with the understanding that you don't consider it legal advice.

      The facts you shared don't give a complete picture. For instance, missing facts include:

      • When you got to Texas.
      • If there is a judgment against you already, and if so, in what state it was obtained.
      • If your bank account is at national bank that has branches in Texas and the other state.

      All of the issues above could affect what happens.

      In general, a judgment-creditor has to domesticate a judgment in a state other than the one in which the judgment was issued, in order to collect on that judgment in the out-of-state jurisdiction. I would be concerned, if I had a judgment against me and my funds were in a national bank, that the creditor would be able to go to a branch in the state in which the judgment was issued and be able to levy the account.

      These are all issues worthy of asking a lawyer, if a bank levy would result in a crippling hit to your finances. If you receive an authoritative answer, please come back and share the information with other readers.

      1 Votes

      • MD
        Oct, 2018
        M

        Thank you. No judgements. I have lived in Texas continuously for several years but have worked out of state and have an out of state account with a credit union that has no branches or shared branches in Texas. I use it online. I have some debts and was wondering how vulnerable the funds are and if it's better to move the account.

        0 Votes

        • 35x35
          Oct, 2018
          Daniel

          Without a judgment, a debt to the IRS or state tax authority, or for federal student loan arrears could lead to a bank levy without you being taken to court. For debts you default on such as credit cards, personal loans, secured loans, cellphone bills, a creditor would have to sue you successfully before it would have the ability to levy your account.

          How far back do these debts go? What is the amount? What companies do you owe? 

           

          1 Votes

          • MD
            Nov, 2018
            M

            I have no IRS/state tax debts or federal student loans. They are credit/personal debts incurred prior to 2011. I have not reviewed a copy of my credit report, but recently learned of two cases: one in Maryland and one in Texas, both dismissed in 2012 by the plaintiff. The Maryland case was greater than $10K. There was no value given in the Texas case. There may be other debts besides those two on my credit report. My credit union is not located in either Texas or Maryland. Just wondering about the risk of still being sued and having a levy placed on my account.

            0 Votes

            • 35x35
              Nov, 2018
              Daniel

              If you date of default was in 2011 or earlier, then the statute of limitations on debt would have passed in both Texas and Maryland. If you are sued, appear in court to use the SOL as a defense. In my opinion, the chances of this devolving into a levy are less than slim. Has anyone contacted you recently, trying to collect?

              0 Votes

              • MD
                Nov, 2018
                M

                Not that I'm aware of, but I've been hesitant to open new accounts, including seeking credit restoration help or requesting a copy of my credit report on the chance new activity might draw renewed attention. Trying to understand the risks going in!

                0 Votes

                • 35x35
                  Nov, 2018
                  Daniel

                  Creditors can't see when you do a soft pull on your credit report. Credit repair can't get rid of accurate derogatory information. I recommend getting a report and seeing when the date of default was. The accounts should not appear 7.5 years from that date. If they do, file a dispute with the bureau(s) that still report them.

                  At the same time, you need to have accounts reporting you behaving in a financially responsible way, in order to establish good credit moving forward.

                  1 Votes

  • TA
    Mar, 2017
    Tejan
    If a Texas resident gets in a car accident in Wisconsin, and owes the hospital money, can the Wisconsin hospital or its collection agency garish wages, levy funds on a joint bank account, levy funds in a separate bank account, or otherwise seize assets, money and property? The Texas resident and his wife in question are on a limited income, as the husband lost his job, and now works 6 to 15 hours a week at a part time job, although the wife sill has a full time job. They are currently selling assets and borrowing money just to pay rent. A levy or garnishment would likely make them homeless. Can an out-of-state creditor seize property and money in Texas? If so, how to avoid it?
    0 Votes

    • 35x35
      Apr, 2017
      Daniel

      First, I can't give you legal advice, as only an attorney can properly do so. However, I will share my opinion. 

      The Wisconsin medical provider could choose to sue you in Texas. If it did and obtained a judgment against you, then you would have the protections that exist under Texas collections laws, which make this kind of creditor unable to levy your wages. While wages are fully protected, a bank account is subject to levy, so if a judgment is obtained against you, having funds in any account with your name places those funds at risk.

      1 Votes

  • FW
    Jan, 2016
    Forrest

    Was married got divorced in 2012. While married got a car in my name for ex wife. When got divorced debt was assigned to my wife. Got a letter advertisment from a lawyer that the creditor has filed a lawsuit for a debt collection. My question I live and work in the state of Texas. My employer is based out of Omaha Nebraska. I am being sued in Texas if they were to win a judgment could they garnish my wages from my employer even though Texas is a non wage garnishment state. I had read they cannot do that but just wanted other opinions. Thanks

    0 Votes

    • 35x35
      Mar, 2016
      Betsalel

      If the payroll office is in a state that allows wage garnishement, then it is possible. I recommend that you consult with a local attorney. You could also consider speaking with your payroll department.

      0 Votes

  • AF
    Apr, 2014
    Abigail
    Grand Prairie, TX
    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

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