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Anatomy Of The Collections Process:  An Overview With Efficiency Tips From A Seasoned Collections Lawyer

The mediation is also a way to educate the debtor on the remedies you intend to use if and when a judgment is obtained.  Mediations are equally improved in dealing with Rambo opponents and attorneys, as well as clients (both sides) who will not appear in their attorneys’ offices and honestly discuss the cases.

B. Settlement.   

Settlement of any case may make sense if it makes dollars and cents!  Defenses and counter claims could make pursuit through trial an expensive and risky proposition.  Sometimes “bird in hand” is better than collecting the judgment into its renewal period.  With the cost and difficulty of collecting debt in Texas the cost/benefit analysis may call for settlement for cash less than the suit amount.

Settlement offers must now be taken more seriously with the passage of Chapter 42, Tex. Civ. Prac. & Rem. Code and T.R.C.P. Rule 197, which governs cases filed after January 1, 2004.  Together, this statute and rule provide for the shifting of litigation costs when a party rejects an offer to settle a claim and the judgment is significantly less favorable than the settlement offer.  The statute and rule govern the manner, contents and timing of the offer.  A complete discussion of the procedure is beyond the scope of this article.

XVII. Trial.

Unless the amount in controversy is large, the success of a counterclaim small or the ultimate collectability certain, a cost benefit analysis will generally not justify trial of a collection suit.  If trial is necessary, the issues can and should be considerably narrowed by pre-trial discovery and summary judgment.

XVIII. Post-judgment Discovery.

Tip:You need not wait 30 days to begin the post-judgment discovery process.  You can even send out your deposition notice and interrogatories in aid of judgment the day the judgment is signed.

In order to best evaluate the collectability of the judgment and to determine which post-judgment remedies should be utilized, the creditor should permit its attorney to take a post-judgment deposition.  Interrogatories are useful, but often the debtor’s answers are less than complete.  Post-judgment depositions with a request for production of various documents reflecting the debtor’s financial situation are much more flexible.  Simple forms for individual and corporate judgment debtors are included as Attachments 11 and 12

respectively.  The depositions can be taken by tape recording and so the cost of a court reporter is not necessary.  Often this is the first time the debtor is face to face with the collection attorney.  In addition to discovering the debtor’s assets and ability to pay, the deposition meeting can be useful in working on a payout of the debt.

Debtors who fail to cooperate in the post-judgment discovery process can be ordered to comply and eventually held in contempt of Court.  The potential of jail time will usually bring the debtor to the table.

XIX. What Assets Can a Judgment     Creditor Reach?

Tip:Corporations and other entities have no exempt property, but individuals do.  A command of what is exempt or not is necessary in order to make the best of your post-judgment deposition, evaluating asset searches and effectively utilizing post-judgment remedies.  It is crucial for collectability analysis.

If the debtor is a corporation, or other entity, all of its assets are subject to seizure.  However, if the assets are subject to a prior perfected security interest it may not be cost effective to go after the assets if the debtor has little equity in the property.  Further, if the debtor’s secured creditor seeks to protect its interest in the property, at least one case says that the secured creditor has rights superior to those of a judgment creditor. See Grocers Supply v. Intercity Investment Properties, Inc. 795 S.W.2d 225 (Tex.App. - Houston [14th Dist.] 1990, no writ).

With individual judgment defendants, the creditor has the added hurdle of determining whether the debtor’s property is exempt from creditor claims under one or more statutes.  Whole papers are written on this subject as well as the subjects of post-judgment discovery and post-judgment remedies.  Basically the debtor’s home is exempt regardless of value, with some restrictions on acreage depending on whether it is urban or rural. The debtor’s home furnishings, clothing, tools of trade, vehicles and other specific personal property listed in the exemption statutes are exempt, up to $30,000 for single persons and $60,000 for families.  Life insurance, retirement plans and wages are also exempt, without limit. The property not exempt from creditor claims will include non-homestead property, bank and savings accounts, stock, and notes and accounts receivable.  In spite of the broad exemptions enjoyed by individual Texas residents, individual debtors can often be encouraged to enter into payment


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