Can a Debt Collector Sue Me in Texas?
If your debts are piling up, you may stay up at night wondering: can a collection agency sue me in Texas? If you are unable to pay a secured debt (a debt backed by collateral such as a home equity loan or car repayment) or an unsecured debt (like a credit card bill), unfortunately, there is no place to hide, even in the vast Lone Star State.
A debt collector can file a lawsuit against you to collect on the debt in one of Texas’ District Courts, which are in nearly every county. Additionally, if you have already received a judgment in a state other than Texas, Texas has a process for recognizing and enforcing judgments, decrees, and orders from the other states under Civil Practice and Remedies Code §35.003.
Called “domestication,” once an attorney has undertaken procedures to localize the judgment against you, he or she can file an abstract of judgment with the county where your property sits. The effects of judgment domestication are serious, for example, you can’t sell your own property if it has a lien on it.
Certain property, however, will almost always stay outside of the reach of both lawsuits and judgments. In this article, expert Attorney Seth Kretzer explains how you can become “judgment-proof” and stay that way in the State of Texas.
What Does Judgement-Proof Mean in Texas?
What does it mean to be judgment-proof? A debtor who is judgment-proof has no property or assets that can be seized to satisfy the outcome of a lawsuit. Creditors can’t attack what you own, because of the type of property it is, or the way it’s received, making it “exempt” under the law.
A judgment-proof defendant is someone who owns nothing of value except a homestead (the home where you live), certain tools of your trade, and judgment-proof income from an “exempt source” – such as Social Security Disability (SSD), Social Security Income (SSI), veteran’s benefits, public assistance, welfare, retirement benefits, worker’s compensation, unemployment, or payments received as part of court-ordered child support or alimony.
Generally speaking, any income that comes from the government is exempt income. If these are the only things you own, you will most likely be judgment-proof in Texas. This makes it extremely difficult for creditors pursuing Texas judgment collection.
What Is a Judgment-Proof Letter
If the circumstances discussed above apply in your case, and all you have is exempt property and exempt income, it is advised to work with an attorney to draft a judgment-proof letter to send to your creditors and their attorneys as soon as possible, preferably, before they sue. This may help you avoid the additional expensive costs that creditors often try to tack on when their collections attorneys get involved. The judgment-proof letter should state why you believe you only have exempt property, your current state of financial distress, and your expectation that things won’t be changing for the better anytime soon.
A long list of exempt property in Texas includes the “homestead,” which is a house and up to ten (10) acres of land in an urban area, or a house and up to one hundred (100) acres of land for a single person and two hundred (200) acres for a family in a rural area under Texas Property Code §41.002.
Personal property up to $50,000 for a single person and $100,000 for a family is also exempt as set forth in Texas Property Code §41.001. Types of property eligible for the exemption include home furnishings, food, farming or ranching vehicles and implements, tools of a trade, apparel, certain jewelry, two firearms, athletic and sporting equipment, one motor vehicle for each licensed driver in the household, pets and certain farm animals.
A full list of exempt property is available under Texas Property Code §42.002.
What Can Be Seized in a Debt Judgment?
To satisfy an outstanding judgment, a creditor can seize any property that does not meet the exemptions laid out in Texas Property Code §42.002, including real estate holdings outside of the homestead, cars, trucks boats and other vehicles besides the primary vehicle, jewelry, collectibles and memorabilia.
This often comes as a disappointment to sports fans as well as people who have inherited family heirlooms, which may be assessed and may exceed the exemptions threshold. In determining what is exempt and non-exempt, attorneys for creditors will often follow up a winning judgment with post-judgment discovery, which may include interrogatories, or questions, about property the debtor owns, as well as requests for admissions, more specific “yes or no” questions about the debtor’s property.
Although wages themselves are not directly seizable, income that is deposited by an employer into a bank account can be seized, once it posts to the account. This leaves very little time for debtors to “move around money,” and further, a creditor who has sent interrogatories or admissions likely already knows how much the debtors makes.
Because a personal bank account can be levied, we advise keeping any income that is exempt income – such as SSI, SSD, welfare, government benefits and retirement income – separate in a segregated bank account.
Also, note that if the judgment creditor is the IRS or the federal government, most bets are off, and fewer Texas property exemptions will apply. Consult an experienced judgment collection attorney in cases where the government is your creditor to see what protections may still be available.
How to Be Judgment-Proof in Texas
Basically, a judgment-proof Texas defendant is someone who owns only exempt property or places the rest of the property in a trust, however, you must take these measures prior to being sued for unpaid debts.
Judgment-proof status for a defendant will remain for as long as your financial condition stays the same or worsens. However, be aware that financial distress is temporary for most people, and you may begin to recover, make more income, and own more property.
Therefore, speaking with an attorney who can help negotiate with your creditors is essential. Working with a professional to learn how to get out of a judgment against you or structure a repayment plan may be a better option for you than protracted litigation as your situation becomes more manageable.
Learn More about Becoming a Judgment-Proof Defendant with Attorney Seth Kretzer
If you wish to know more about being judgment-proof in the State of Texas, you will need a lawyer with specific experience enforcing judgments as well as helping clients avoid debt consequences.
To schedule a free consultation about your case, contact the Law Offices of Seth Kretzer today!