Texas Collection Laws
- 8 min read
- 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:
- Wage garnishment
- Account levy
- Lien on real property
- Seize personal property
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 statute of limitations for debt
- Texas collection agent laws
- Spousal debt and community property in Texas
- Texas foreclosure
- Payday loan collections in Texas
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 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.” 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 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. Texas offers many exemptions for consumers:
- Homesteads: Generally 100% exempt, except for:
- Purchase money liens
- Mechanic’s and materialman’s liens for work on that property
- 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 Texas Property Code 42 to learn more about the exemptions in the Lone Star State. 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 lien law is tricky and tipped in favor of consumers. 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.
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 Liens & How to Resolve Them 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:
|Credit card||4||Texas Civ. Prac. & Rem. Code § 16.004(c)|
|Promissory note||6||Texas Bus & Com. Code § 3.118(a)|
|Judgment||10*||Texas Civ. Prac. & Rem. Code § 52|
|* Can be renewed (Texas Civ. Prac. & Rem. Code § 31.006) A non-Texas judgment may be domesticated in Texas (Tex. Civ. Prac. & Rem. Code § 35.003 and § 16.066)|
Texas statutes of limitations. Source: Bills.com
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 FDCPA 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 Statute of Limitations on Debt 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 Texas debt collection law and the federal Fair Debt Collection Practices Act. 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 Debt Collector Search form consumers can use to learn if the collection agent contacting them filed a bond properly. File a complaint with the Texas attorney general’s office 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 Texas Community Property to learn more about your potential liability for your Texas spouse's debt.
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, consumer law, or bankruptcy to receive precise answers to your questions about liens, levies, and garnishment in Texas.
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Dealing with debt
If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q4 2022 was $16.91 trillion. Student loan debt was $1.60 trillion and credit card debt was $0.99 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
The amount of debt and debt in collections vary by state. For example, in California, 21% have any kind of debt in collections and the median debt in collections is $1824. Medical debt is common and 8% have that in collections. The median medical debt in collections is $712.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.
I'm a realtor in Texas, I am only paid when I have a closing. I have been sued by several debt collectors for CC debt. I had an incident that happened a year ago that caused me to be unable to pay my debt. My home is homesteaded, my car has a lien. I have a retirement account. Can they take money from my checking account since I do not receive a regular paycheck?
My answer is not to be taken as legal advice, as I am not a lawyer.
Yes, money in your checking account is vulnerable. The fact that you don't get a regular paycheck does give your bank account a different status. Because Texas doesn't allow wage garnishments for most debts, going after a judgement-debtor's the bank account is the most effective means the judgment-creditor has to collect,
I just received a letter stating that a default judgement has been ordered against me after i failed to show up for court. I owe about $3300 for a credit card and I live in Texas. I understand that my bank accounts can be accessed by the collections agency. Is it difficult for the agency to be granted this in Texas? How long does this process take? How likely is it that the collections agency be granted access to my bank accounts? Thank you.
I am not a lawyer and can't give you legal advice. Please do not take anything I share as legal advice.
If there is a judgment against you, then the creditor would have the right to pursue a lien on your bank. It would seem quite likely that they would pursue that action.
I am not sure of the time it will take, but you should be in touch with your bank or a lawyer to see if any of your money is protected.
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.
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.
If I have a judgement in Texas . Can the creditor seize money I have deposited in a bank out of state?
Terry, I am not a lawyer and only lawyers can give legal advice. I will share my thoughts, but it is not to be taken as legal advice.
I think that it depends on the kind of bank. One component, I believe, is whether the bank is federally chartered or state chartered. Another component is whether there are branches of that bank in the state in which the judgment is issued. If your out-of-state account is with a major bank, such as a Chase, Citi, or Wells Fargo, I believe your funds are at risk if that institution has branches in Texas.
If your bank account is at the Payne County Bank in Oklahoma, I tihnk the only way they can get the funds is if they take the Texas judgment and domesticate it in OK.
That is the best I can do, Terry. Speak with an attorney to get an authoritative answer.