Texas Commercial Law Firm

Debt Collection in Texas

Balcom Law Firm Attorneys specialize in debt collection of secured and unsecured debts. Such debts commonly include judgments, promissory notes in default, open accounts, lease defaults, breach of contract claims or other obligations to pay not secured by a pre-existing contractual lien.   In order to collect a debt in Texas, the defendant must own non-exempt real estate or personal property in Texas which is not fully encumbered by a superior lien.  Texas has perhaps the most liberal homestead and personal property exemptions generally making debt collection in Texas against consumers far more difficult than in most other jurisdictions.  These liberal exemption rules do not apply to businesses, however, making commercial litigation to collect debts a worthwhile endeavor in Texas so long as the debtor has assets from which to collect the judgment.

Reducing an Unsecured Claim to Judgment

With some notable exceptions, (such as peaceful, self-help repossession) collection of an unsecured claim from a debtor who is unwilling to pay usually requires commercial litigation and eventually, that the right to payment be reduced to judgment.  Although some debtors will decide to pay the debt upon receiving a demand letter from a law firm, in most cases debt collection is not so easy.  This means that if you are serious about collecting a debt in Texas, in most cases, a collection suit must be filed and commercial litigation pursued until a judgment is rendered in favor of the creditor.  A judgment is really nothing more than formal, judicial verification that a debt is due and payable and that the party holding the judgment is entitled to pursue collection of the judgment through debt collection procedures authorized by Texas statutes specifically enacted to facilitate debt collection. We specialize in collecting unpaid debts arising from promissory note payment defaults, breach of contract, unpaid invoices, (open accounts), defaulted leases and other defaulted obligations and claims for payment.   We pursue commercial litigation and aggressively seek to collect the debt through pre-judgment and post-judgment debt collection procedures described below.

Debt Collection in Texas:  Pre-judgment Judicial Remedies:

In addition to self-help repossession without breach of the peace there are specific actions which may be taken in Texas courts in order to prevent a debtor from hiding, removing or damaging property that may be subject to being seized in order to pay a creditor’s claims.  These remedies are considered extraordinary remedies as they may be obtained by court order “ex parte” or in other words, without providing the debtor with advance notice.  The advantage of obtaining an order “ex parte” is, of course, that it minimizes the likelihood that the debtor will transfer, hide or damage property in order to keep it from being seized to pay his debts.  The extraordinary remedies referred to are known as “sequestration”, “garnishment” and “attachment” and are individually discussed in more detail.

Writ of Sequestration: A prejudgement debt collection tool  whereby a creditor asserting an interest in property of the debtor may have the property taken into court custody and protection. By obtaining a writ of sequestration a secured creditor obtains a court order granting possession of collateral (such as vehicles, mobile homes, boats, etc.) which the creditor represents to the court is in danger of damage, concealment or of being hidden away by the debtor.   We handle sequestrations routinely on a volume basis as described at the following location. Read more about sequestration

Writ of Attachment: A prejudgment debt collection tool  used to reach non-exempt assets (whether real estate or personal property) of the debtor in the debtor’s possession and control.  Such property becomes subject to levy ( “levy” is when a constable or sheriff takes control of property bringing it under control of the court) in order to protect the property from being hidden, damaged or sold by the debtor so that it is available to satisfy the debtor’s obligations to the creditor.  The primary difference between attachment and sequestration is that sequestration requires that the creditor have an interest (such as a lien) in the property subject to sequestration.  With attachment, the creditor seeks to reach non-exempt property of the debtor in which the creditor holds no preexisting interest.   Texas Rules of Civil Procedure Articles 275 - 302; Rules 592 - 609.

Writ of Garnishment: A prejudgment debt collection tool (may also be used for post judgment debt collection as described below) used to reach non-exempt property (including real estate and personal property) of the debtor in the hands of a third party.  A writ of garnishment may be used, for example, to reach a debtor’s bank account.  Unlike most other states, however, in Texas, garnishment cannot be used to reach a debtor’s current wages before they are paid to the debtor.  Most prejudgment writs of garnishment require an affidavit stating that the debt is just, due and unpaid and to the creditor’s knowledge, the debtor has no property subject to execution to satisfy the debt and that the garnishment is not brought for the purpose of injury to the debtor or third party/garnishee.  A pre-judgment writ of garnishment may also be based on a writ of attachment in seeking collection of a debt.  Texas Rules of Civil Procedure Articles 4076 -4099; Rules 657 - 679.

Post-judgment Debt Collection in Texas:

Writ of execution.  To enforce a valid, final judgment in Texas, in attempting to collect the debt, one obtains a writ of execution from the court which entered the final judgment.  The writ of execution authorizes the sheriff or constable to levy upon non-exempt property (real estate or personal property) of the judgment debtor located within their jurisdiction.

Abstract of Judgment.  After a judgment is final, the creditor attempting to collect a debt should request issuance from the court of an abstract of judgment against the debtor.  The abstract of judgment should then be recorded in the real property records of every county where the creditor believes the debtor may own real estate.  A properly obtained and recorded abstract of judgment will serve to “perfect” the judgment lien and thus establish the creditor’s lien priority with respect to any ownership interest of the debtor in any non-exempt real estate located in the county where the abstract of judgment is recorded.  Because abstracts of judgment are only effective as to the county where they are recorded it is essential that they be recorded in each and every county where it is suspected the debtor may now own or possibly in the future acquire real estate.  Abstracts of judgment need not describe specific property as they are indexed in county real property records by name and immediately attach to any non-exempt real estate interest of the debtor immediately upon the earlier to occur of the following: the recording of the abstract of judgment or the debtor’s acquisition of non-exempt real estate.

Writ of Garnishment.  The writ of garnishment is also available as a post-judgment debt collection procedure.  As in pre-judgment debt collection a writ of garnishment used in post judgment proceedings requires a third party to describe under oath what money or property of the debtor the third party/garnishee has in its possession.  Likewise, the third party/garnishee is prohibited from delivering such money or property to the debtor after the writ of garnishment is served.  The third party/garnishee may be required to pay the creditor (garnishor) an amount up to the amount of the creditor’s judgment against the debtor.  A creditor seeking a post judgment writ of garnishment will be eligible for the writ if the creditor holds a valid, subsisting judgment and the creditor submits an affidavit stating that within the creditor’s knowledge the debtor does not possess property in Texas subject to execution sufficient to satisfy the judgment.

The lawyers at Balcom Law Firm in Houston, Texas are experienced and successful in debt collection and collections law. Contact us today to get more information.