Not only are things "Bigger and Better in Texas", so is protection from debt collectors!
Living in Texas (I grew up in Dallas) has a lot of advantages, but none as important as protection from debt collectors.
If you are facing overwhelming problems with too much debt and you are fortunate enough to be a Texas resident, then you have certain protection from creditors and debt collectors that other states do not offer!
For the sake of this article, I'm talking about UNSECURED DEBTS, such as:
- Credit Cards
- Store Credit Cards
- Personal Loans
- Private Student Loans
- Medical Bills
- "Pay-Day" Loans
When you can't make at least the required minimum payments on your unsecured debt, and miss a payment or two, here's what usually happens:
First, the original creditor (Visa, Master Card, US Bank, etc.) will most likely give you a call and send a letter reminding you that your account has become delinquent. Sometimes the language is very...let's say, "firm or somewhat threatening". Something like:
Dear Mr. So-n-so:
Your account with XYZ company has become seriously delinquent. Missing payments on your account can have a negative effect on your credit report. We understand that you may be facing a difficult time and want to work with you on this matter.
Please give one of our customer service representatives a call to discuss your options. It is imperative that you bring your account current as soon as possible, to avoid legal action.
OK, so what do you do?
If you think you will be able to get your account caught up, then give them a call to see what can be done. Sometimes the creditor is willing to forgive late fees and other penalties if you can bring your account current.
But what if you know you can't "bring your account current"?
It has been my experience, that most people who need help with their debts are not someone who just "over-spent" foolishly. They are people just like you and me who got into trouble. It's important to know how this process works so that you (or someone you know) is not taken advantage of by a debt collector.
There are all kinds of reasons why people get in trouble with their credit:
- Loss of employment
- Loss of a spouse or partner
- Prolonged illness
- Retired and on a fixed income not quite enough to keep up!
- and many other reasons that are beyond your control!
After the original creditor has made many attempts to contact you by both phone and mail, they may decide to write-off or charge-off your account and transfer or sell to a debt collector.
Now the DEBT COLLECTOR starts sending "nasty" letters and making call after call!
If you have only missed a payment or two, and have the means to get caught up, I think it is a good idea to contact your original creditor to discuss trying to bring your account current.
But, I do not believe it is your best interest to call a debt collector.
There are those that disagree with me on this, but my experience in dealing with debt collectors over many years has taught me that they only have one job and that is to get as much money in the shortest period of time.
They don't really care about your situation and for the most part are not sympathetic at all. In fact, I had one of my retire clients who had also lost her husband of over 50 years tell me that a debt collector told her that she should go get a job and quit making excuses for her debts. Really? 72 years old and a widow! And not only that, rather than file for bankruptcy protection as she could have, she has chosen to settle as many debts as possible.
Many debt collectors are fine, professionals and you can work with them. But some are, well... you know! So, my advice is not to try and call to explain your situation, especially if you live in Texas!
What happens if a debt collector takes LEGAL ACTION?
A debt collector has the option to FILE A COMPLAINT in your county's court. This is a legal option they can use in order to scare or force you to pay your debt.
Once the COMPLAINT is filed, you will receive a SUMMONS. The summons will state that the PLAINTIFF (that's the credior or debt collector) CLAIMS that you owe this debt. It will also state that you have 30 days (some state 20 days) from the receipt of this summons to file an ANSWER.
An ANSWER is a legal brief explaining why you legitimately do not owe this debt. There is usually a cost to file the ANSWER, and most likely you will need an attorney to file it so it is in the proper "legal" form. About 99.9% of the time, you owe the debt, so there is no need to dispute it. The key is to know how to handle it.
I've written several blogs over the years explaining what to do if you recieve a summons. If you live outside of Texas, I would encourage you to not only read about your options, but you will need to take action.
But hey, ya'll...if your a Texas resident, I've got good news!
The purpose of filing the claim is to get you to:
1) Take action to pay your debt out of fear of what may happen if you don't!
2) The debt collector hopes to be awarded a JUDGMENT, so they can either GARNISH YOUR WAGES, place a LIEN ON YOUR HOME or even LEVY YOUR BANK ACCOUNT.
In the great state of Texas, you have laws that protect you from creditors like few other states.
Your wages cannot be garnished for unpaid, unsecured accounts, but even in Texas, they can be garnished for child support or alimony, unpaid taxes and defaulted student loans, so be advised!
Your home is also protected from a lien with a wonderful Texas Homestead Protection!
Although there a some restrictions to the homestead law, basically it means that a creditor cannot apply a lien against your property for unpaid, unsecured debts.
So, your wages and home are protected in Texas, what about your bank account?
As in all states, if your only source of income is from Social Security and/or a Retirement Plan or Fund, Disabily Income, etc. and those monies are directly deposited in your bank account, THEY ARE EXEMPT FROM GARNISHMENT OR LEVY.
HOWEVER, although your wages are exempt in Texas, once they are deposited in your bank account, they would be subject to a garnishment or levy (after a judgment is awarded to the creditor)!
I advise any client who has earned income to NOT DEPOSIT to your bank account with a judgment against you! I know it can be a hassle, but think about what it would be like to start bouncing checks on Monday after your bank account was FROZEN over the weekend!
Bottom line for all of you Texas Residents:
- Your home (including a mobile or manufactured home) is exempt from a LIEN
- Your wages are exempt from garnishment
- But, you need to take caution with your bank account!