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

agreements to prevent being sued.  As judgment debtors they can eliminate follow-up depositions and the threat of collection remedies if a payment agreement is worked out with the judgment creditor.

XX. Post-judgment Remedies.

A. Judgment Lien.  

The mere entry of a judgment by the Court is not enough to create a judgment lien.  The judgment must be properly abstracted and filed with the county clerk.  It will create a judgment lien on all non-exempt real property in the county where filed.  It does not create a lien on the judgment debtor’s personal property or accounts. Tex.Prop. Code Ann. §52.001 (Vernon 1995).

B. Executions.  

The judgment debtor’s real and personal non-exempt property can be seized by a sheriff or constable with a writ of execution.  After seizure, if the judgment debtor does not post a bond, the property will be sold and the proceeds paid over to the judgment creditor.  The judgment creditor can buy the property at the sale by bidding credits to the judgment;  however, all property is purchased as is and subject to all liens.

C. Garnishments.  

A garnishment writ will be issued on application of the judgment creditor, which must include a sworn statement that to the applicant’s knowledge the judgment debtor does not possess property in Texas subject to execution sufficient to satisfy the judgment. Tex.Civ.Prac. & Rem. Code Ann. §63.001(2)(B) (Vernon 1997).  Creditors are often excited about proceeding with garnishments when they know or expect they know where the judgment debtor banks.  They must often be cautioned about the required sworn statement.  They must also be cautioned about the judgment debtor’s bank’s potential rights of offset in the event of garnishment when the judgment debtor owes money to its bank.

Garnishment actions are not limited to bank accounts.  A judgment creditor can garnish savings and stock accounts as well as any non-exempt personal property of the judgment debtor held by a third party.

D. Turnovers.  

While non-exempt real and personal property can be reached by execution, and accounts and stock by garnishment, certain property interests may require the aid of the Court to reach.  The turnover proceeding is a post-judgment remedy that in most cases involves a motion, hearing (which may be ex parte) and a resulting order.  The order will require the judgment debtor to turn over its property to a constable or receiver for sale with the proceeds to be distributed to the judgment creditor.  This order is enforceable by contempt. Tex.Civ.Prac.&Rem. Code Ann. §31.002, et seq (Vernon

Supp. 1997).  The proceeding may be used to reach property located outside of Texas, intangible property, property the debtor has secreted, accounts and notes receivable, and any other property that is difficult to reach.

E. Other Remedies.  

If the debtor has a limited partnership interest, the interest may be reached via a charging order under the limited partnership statutes. Turnover orders may be useful for reaching general partnership interests.  If the dollars are large enough and if fraudulent transfers are discovered, the creditor may find the necessity to file yet another suit to set aside a fraudulent transfer in order to collect its judgment.

XXI. Judgment Renewal.

Tip:Don’t wait till the eve of dormancy to renew the judgment.  The clerk’s office may have the file in offsite storage so it may take a while to get a writ issued.

The judgment is good for ten years.  It will become dormant if a writ of execution is not issued before the end of the ten year period.  Tex.Civ.Prac.&Rem. Code Ann. § 34.001 (Vernon 1996). If it becomes dormant, it can be revived within two years of its becoming dormant.  Tex. Civ.Prac.&Rem. Code Ann. §31.006 (Vernon 1996).

The judgment lien continues for a period of 10 years following the date of recording and indexing the abstract except if the judgment becomes dormant, in which event the lien ceases.  Tex.Prop.Code Ann. §52.006 (Vernon 1984).  Therefore one must (1) keep the judgment alive and (2) obtain and record a new abstract of judgment, in order to extend the judgment lien.


Practice Management

Tip:  A successful collections practice requires (1) up-to-date forms, (2) systems to manage work flow and production; and (3) highly trained legal assistants.

Perhaps this section of the paper should have been first, rather than last.  A law practice dedicated to debt collection is a unique animal.  While a general litigation practice benefits from these same components, a successful collections practice depends on them.




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