When You Need to Collect on a Money Judgment in Texas
Most business owners would readily admit that there’s nothing fun about debt collection. As a matter of fact, it’s more of a hassle in Texas than in other jurisdictions. When you finally get a money judgment in hand, there’s no doubt you’re ready to move forward.
First and foremost, there’s the issue of obtaining a judgment against the debtor who owes your company money. Take a few moments to review this short video to understand the importance of using an experienced attorney for your commercial debt collection efforts. In some cases, your lawyer may be able to work out a payment plan or settlement that works in your favor.
Unfortunately, some customers continue to stay in arrears. They may ignore collection efforts or fail to keep up with payment plans. As a result, it may be advisable to bring the matter to court. The goal is to obtain a judgment against the delinquent debtor. Of course, you need to know what happens next.
Collecting on Judgments Against Debtors
Although it’s unlikely that you’d consider it, you can’t just run out and take hold of the debtor’s personal property. In fact, here in Texas, it’s unlikely that you’ll be able to effectuate a wage garnishment for debt collection. Wage attachments are only available for very specific reasons. This includes alimony, child support, student loans, and taxes.
Under Texas law, consumers receive a great deal of protection. Meanwhile, consumer debt is defined as “an obligation or alleged obligation, primarily for personal, family, or household purposes and arising from a transaction or alleged transaction.”
No doubt the debt owed to you as a business may fall into this category. Chances are you supplied some kind of services or goods. And, of course, it’s reasonable to expect to be paid for them. Notwithstanding, you need to make sure your attempts to act on a judgment are done within the confines of the law.
For some, it may be possible to place a lien on the debtor’s property. Mechanic’s liens and construction liens are beneficial to a number of companies. For example, if you performed remodeling services on someone’s residence, your business might be able to attach a lien. The same is true for suppliers and distributors.
Unfortunately, one problem with collection efforts is that debtors sometimes hide their assets. This is a common predicament when the debtor does not show up in court, and a default judgment is entered. As a creditor, you may find it necessary to request a turnover order.
All things considered, applications for turnover orders are a smart collection strategy. The “turnover statute” is found at Tex. Civ. Prac. & Rem. Code § 31.002. Essentially, the purpose of the law is to gain assistance from the court in collecting on money judgments. Some of the provisions of the law include:
- Requirement that judgment debtor “turnover” nonexempt property in their possession and control, as well as all pertinent records and/or documentation
- Appointment of a receiver with authorization to take possession of the non-exempt property
- Contempt charges for debtor’s failure to comply with court order
- Assessment of fees payable to the creditor for court costs and attorney representation
Turnover orders work in many cases. Nevertheless, it is critical that the creditor is aware of the necessary procedures. For example, certain properties may be exempt from turnover proceedings. However, it is up to the debtor to show proof of an exempt claim.