Statute of Limitations Debtor's Suit Texas by uyl31415


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									                          CONSUMER AND BANKRUPTCY BASICS

I.   Consumer
     a. Common Issues Regarding Debts
         i. No Debtor’s Prison—debtor cannot go to prison for not paying his debts but creditors can
            hire collection agents or attorneys to pursue collection of debts and can sue for debt
        ii. Collection Agents and Attorneys
            1. Federal Fair Debt Collection Practices Act—protects consumers from harassment
                from debt collectors (but not the original creditor)
            2. Texas Fair Debt Collection Practices Act—protects consumers from harassment from
                both debt collectors and the original creditor
            3. Debt collector may contact debtor’s employer for the limited purpose of trying to locate
       iii. Creditor Harassment—defined
            1. Use or threat of use of violence or other criminal means to harm the person,
                reputation, or property of person
            2. Use of obscene or profane language
            3. Publication of list of consumers who allegedly refuse to pay debts, except to consumer
                reporting agencies
            4. Advertisement for sale of any debt to coerce payment of debt
            5. Causing telephone to ring or engaging any person in telephone conversation
                repeatedly or continuously to annoy, abuse, or harass
            6. Placement of telephone calls without meaningful disclosure of caller’s identity
      iv.   Stopping Collection Activities
            1. Consumer may notify debt collector that consumer wants collector to cease contacting
                the consumer about the debt
            2. “Judgment Proof letters” should be in writing and sent certified mail, return receipt
                requested, to debt collector
            3. Debt collector may only contact consumer once after receiving notice—to inform
                consumer what the collector intends to do about the debt
            4. Original creditor can still file suit to collect debt
        v.  Wage Garnishment—generally, wage garnishment limited to child support, IRS income
            taxes, and guaranteed student loans
      vi.   Repossessions
            1. Secured creditors may repossess items from debtor—must be done only if it can be
                done without breaching the peace
            2. Creditor may re-sell the property and debtor then owes any balance
            3. Debtor not required to allow “repo man” access to property without court order and
                may order repossessing agent to leave property
      vii.  Lawsuits
            1. Petition filed alleging debt exists (“suit on sworn account”)
            2. Depending on amount in controversy, lawsuit may be brought in either JP or District or
                County Court
                a. JP Court—amount in controversy under $5000 and time for answer is Monday
                     after expiration of ten days
                b. County or District Court—amount $5000+ and answer time is Monday after
                     expiration of twenty days
     viii.  Judgments
            1. Writ of Execution—allows constable to seize non-exempt property of debtor
            2. Abstract of Judgment—legal document filed with the real property deed records to
                reflect that a person owes a debt (making it difficult to sell property until debt is paid)
            3. Turnover Application—process that forces debtor to appear at court to state what non-
                exempt property, if any, the debtor has to turn over toward collection of judgment
            4. Judgments may be listed on credit reports, making it difficult to obtain credit in future
           5. Judgment stays “alive” for ten years, but can be renewed
      ix.  Exempt Property
           1. Generally, homestead is exempt from seizure
           2. Personal property
               a. Exempt Property
                   i.  Home furnishings, including family heirlooms
                  ii.  Provisions for consumption
                 iii.  Farming or ranching vehicles and implements
                 iv.   Tools, equipment, books, and apparatus, including boats and motor vehicles
                       used in trade or profession
                  v.   Wearing apparel
                 vi.   Jewelry not to exceed 25% of aggregate limitations
                vii.   Two firearms
                viii.  Athletic and sporting equipment, including bicycles
                 ix.   A two-wheeled, three-wheeled, or four-wheeled vehicle for each member of a
                       family or for a single adult who holds a drivers license
                  x.   Two horses, mules, donkeys, and a saddle, blanket, and bridle for each; 12
                       head of cattle; 60 head of other types of livestock; and 120 waterfowl
                 xi.   Household pets
                xii.   Unpaid commissions for personal services not to exceed 25% of aggregate
               b. Cash is NOT exempt
               c. Other Exempt Property
                   i.  Current wages for personal services, except for enforcement of court-ordered
                       child support payments
                  ii.  Professionally prescribed health aids of debtor or dependent of debtor
                 iii.  Alimony, child support, or separate maintenance received or to be received by
                       debtor for support of debtor or dependent of debtor
                 iv.   Retirement plans that meet IRS qualification guidelines
     b. Debt Relief Strategies
        i. Direct Negotiation with Creditors
           1. Debtors may ask for lower interest rate, decreased monthly payment, or decrease in
               principal balance
           2. If requested early (before overdue) and not requested often, some creditors are willing
               to allow a debtor to “skip” a payment while extending payment period, i.e., 36 month
               car loan becomes a 37 month car loan
       ii. Credit Counseling Services
           1. May be able to assist with financial planning and budgeting
           2. May be able to assist in negotiation with creditors
           3. May be free or fee-based services—look for free services
      iii. Bankruptcy—for debtors who find that there is not possibility of entering into agreement to
           repay debts
           1. Bankruptcy leads to ”fresh start” by discharging debtor’s obligation to pay debts
           2. Judgment proof debtor may choose to do nothing, knowing that his/her property is
Debtors who understand the concepts of exempt property and being judgment proof
may use this knowledge to their advantage in negotiating with creditors, reminding
creditors that accepting an offer by debtor may mean getting something versus
suing debtor and getting nothing (or incurring additional expenses). HVLP generally
does not accept files for referral if creditor letters are all that is needed.
Texas is a very “debtor-friendly” state.
                                         Chapter 7 Bankruptcy
1. Chapter 7 Bankruptcy—“fresh start” because debtor is released from responsibility of paying back debts
      a. Debtor files documents revealing complete financial situation—all debts, all property, and all
          income MUST be disclosed
      b. Debtor may keep exempt property and may choose either federal or state exemptions to protect
          his/her property to the maximum extent possible but may have to relinquish some property to satisfy
      c. Bankruptcy will remain on credit report for ten years
      d. Bankruptcy may filed only once every six years (will change to once every eight years)
      e. Current fees are $209 and must be paid—no waivers—and fees are expected to go up after new
          legislation takes effect
      f. Both credit counseling and debtor education classes will be required by October 2005, at
          additional expense to debtor
      g. Upon filing, an “automatic stay” goes into effect, and all creditors must cease collection efforts
2. Chapter 13 Bankruptcy—“repayment plan” for wage-earner
      b. Commonalities with Ch. 7—full disclosure of debts, income, and property; exempt property choice;
          automatic stay
      c. Repayment Plan—debtor must have regular income in an amount sufficient to pay off delinquent
          debts over an extended period of time
                 i. Plan can be between 36 and 60 months (3 to 5 years)
                ii. Plan must be approved by bankruptcy trustee
               iii. Debtor pays back all or a portion of debt to creditor
3. Types of Debts
      a. Secured Debts—creditor provided property directly to debtor and debtor made promise to pay —
          houses, cars, store charge cards; items are generally “repossessable”
                 i. Surrender the collateral (allow a repossession)—give back the property and let creditor re-
                    sell it; balance may still exist
                ii. Redeem the collateral by paying fair market value of the item
               iii. Reaffirm the debt and continue making payments
      b. Unsecured Debts—credit cards, “quickie” loans, medical bills
      c. Other non-dischargeable debts—money owed to the US government (student loans and IRS tax
          debt) and child/spousal support generally not dischargeable
4. Debt Relief Strategies
      a. Direct negotiation with creditors
                 i. Debtor may ask for lower interest rate, decreased monthly payment, or decrease in principal
                ii. If requested early (before payment is overdue) and not requested often, some creditors are
                    willing to allow debtors to “skip” a payment while extending the loan period, i.e. 36 month car
                    loan becomes a 37 month car loan
      b. Credit counseling services—investigate to ensure that agency is non-profit and check the fees that
          are charged
                 i. May be able to assist with financial planning and budgeting
                ii. May be able to assist in negotiation with creditors
      c. Other alternatives
               i. Cut expenses now—get a smaller apartment, get a roommate, buy a cheaper car, ride
                  Metro, cut off cable service, eliminate other extras, stop using credit cards (any debt from
                  these can then be included in bankruptcy)
              ii. Increase income—get a (second) job
             iii. Send creditor letters
      d. Creditor Letters
               i. Debtor can send letter, certified mail, return receipt requested, advising creditor that the
                  debtor cannot pay the debt and asking that the creditor cease collection efforts (forms are
                  available in many books)
              ii. Creditor must cease collection efforts but can make one last contact to inform deb tor of
                  creditor’s intention (whether the creditor will write off the debt or sue)
             iii. If creditor violates this law (state and federal versions), the creditor may be liable for
      e. Do nothing—judgment-proof debtors
5. Common Issues
      a. Both credit counseling and debtor education classes will be required by October 2005
      b. Stop using credit cards NOW!!
      c. Judgment-proof debtor—a debtor is considered judgment-proof if all of debtor’s property is exempt
         (protected), i.e. creditor can sue but even if creditor obtains a judg ment, it cannot be satisfied
         because debtor has no “extra” (non-exempt) property
      d. Monthly budget—are monthly expenses more than monthly income? Bankruptcy will not solve
         the problem of living beyond means and will only dissolve existing debt (and if expenses are greater
         than income, debtor will immediately be in debt again)
      e. Does the debtor’s situation pass the “smell test?”
               i. Payment and spending history—were the bills paid regularly and on time with regular
                  purchases until the loss of job or the onset of illness? Did debtor go on spending sprees or
                  have lots of cash advances? Did this start before or after job loss or illness?
              ii. “Robbing Peter to pay Paul?”—cash-advancing from Credit Card A to pay Credit Card B,
                  incurring not only more debt but also more interest? Depending on amounts and dates, this
                  can be viewed as fraud and can prevent discharge.
      f. Medical bills—is debtor likely to incur ongoing bills due to same or related medical problem? It’s
         better to wait to file if medical bills will be a continuing source of debt or to be sure that debtor will
         qualify for Medicare/Medicaid/gold card, etc. Medical provider can refuse to provide services to a
         debtor if debt is discharged.
      g. Creditor Harassment—creditors have a right to attempt to collect the money that is owed to them
         and may send letters or call or have collection agents send letters or call
               i. Caller ID—ignore phone calls from “unknown,” “out-of-area,” or “private” numbers
              ii. No caller ID—either everyone leaves a message and debtor returns the calls or deb tor picks
                  up when s/he recognizes caller as a non-creditor
             iii. Don’t attempt to negotiate with creditors/collection agents or try to explain why payment
                  impossible—they don’t care; their job is to get debtor to send money
             iv. Send creditor letters, especially if callers become abusive
      h. Debtor is sued for debt
               i. Unless debtor can prove account is inaccurate, debtor will LOSE in court
              ii. Judgment for creditor will be “executed”—constable/sheriff will go to debtor’s address to
                  attempt to collect debt (look for non-exempt property to sell to satisfy judgment)
             iii. Judgment will be entered in county records and create lien against any real property owned
                  by debtor; makes sale of property impossible without settling judgment debt
             iv. Judgment must be re-executed every ten years to remain valid
      i. How old are the debts?
 i. Statute of limitations for most consumer debt is four years, after which most creditors cannot
    sue for the debt
ii. Most consumer debts remain on credit report for seven years

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