Introduction

Successfully collecting your Texas Judgment requires an aggressive use of post-judgment remedies. There are many collection remedies available to you as a judgment creditor. The focus of this article is the judgment lien.

Creating the Judgment Lien

A lien is a claim against a person’s property for payment of a debt. Your judgment is a court created debt in which another person, the judgment debtor, becomes obligated to pay you a certain sum of money. But, that court created debt does not automatically create a lien on the judgment debtor’s property. You must take affirmative action to fix a lien against your judgment debtor’s property with the debt your judgment creates. When you properly fix a judgment lien, it acts as a lien on all of your judgment debtor’s non-exempt real property in the county where you record it.

Attaching a lien to your judgment debtor’s property is as simple as recording an abstract of the judgment creating the debt. You just record an abstract of your judgment in each county where your judgment debtor owns real property to create a lien on the property. For example, suppose your judgment debtor owns property in Dallas County and Harris County. If you record an abstract of your judgment in Harris County but not in Dallas County, you attach a lien only on the property in Harris County. To affix your lien to the Dallas County property, you must record your lien in Dallas County.

Keeping the Judgment and Judgment Lien Alive

Once recorded, your judgment lien attaches to your judgment debtor’s non-exempt property for 10 years unless the judgment becomes dormant. If the judgment becomes dormant, the judgment lien ceases to exist.

Your judgment becomes dormant if you don’t issue a writ of execution within 10 years after the judgment was signed by the judge. If your judgment becomes dormant, it will lose its priority position in the abstract records. It is important, therefore, for you to keep your judgment lien alive. You can keep it alive by:

1. Recording a new abstract before the end of 10 years from the date of the last abstract; and

2. Executing on the judgment before it becomes dormant.

The Effect of a Judgment Lien

The potential impact of the Texas judgment lien was seen in the highly publicized case involving Pennzoil Company and Texaco in the mid-1980s. Texaco, Inc. v. Pennzoil Co., 626 F.Supp. 250 (S.D.N.Y. 1986), rev’d 107 S.Ct. 1519 (1987). As you may recall, Pennzoil won a very large judgment against Texaco. After the judge signed that judgment, Pennzoil was entitled to abstract it and record it in each county in the State of Texas. By doing so, Pennzoil was perfecting its judgment lien on all of Texaco’s real property in Texas.

Texaco, realizing the impact of the judgment lien, filed suit in the United States District Court for the Southern District of New York challenging the constitutionality of Texas judgment lien laws. Ultimately, the case was appealed to the United States Supreme Court. The Supreme Court ruled that the federal courts should not be interfering with the Texas judicial system. Texaco was forced to file bankruptcy to prevent Pennzoil from taking further action to perfect its judgment lien.

Practical Tips

Recording an abstract of your judgment is an inexpensive method to insure future collection. You should consider recording an abstract in:

1. The county where your judgment debtor lives.

2. The county where your judgment debtor works.

3. The county where your judgment debtor’s family lives (inheritance possibilities).

4. The county where your judgment debtor has previously owned property (he may try to invest again).

Keep a close eye on your time frames. You want to keep your judgment and judgment lien alive. You should begin the process of getting a writ of execution and a new abstract ready not later than 9 years after your initial judgment is signed. An early start will insure that all procedures are complete prior to the 10 year anniversary of the judgment and judgment lien.

Assumed name records can be a rich source of information for a judgment creditor.  But, judgment creditors routinely overlook assumed name records in their search for judgment debtors and their assets.

Who Must File An Assumed Name Certificate?

In Texas, any individual who does business under a name that does not include his own surname must file an assumed name certificate.  Others who must file include:

1.  Any individual whose business name suggests that there are others who own the business with him.  For example, if the business uses “Company,” “and Company,” or “and Sons,” it must file an assumed name certificate.

2.  Any partnership whose name does not include the surname of each partner.

3.  Any Corporation, L.P. or L.L.C. that is doing business under a name other than the one in its official creation documents filed with the Secretary of State (i.e., Articles of Incorporation or Articles of Formation).

Where Do You Find Assumed Name Records?

Corporations, limited partnerships and limited liability companies must file their assumed name certificates with the Secretary of State in Austin.  The certificate must also be filed in the county where the company maintains a registered agent.

All other businesses must file their assumed name certificates in each county in Texas where they do business.

What Can You Expect to Find in Assumed Name Records?

Assumed name records will generally give you the name and address of the owner of the business.  So, if your judgment debtor business has more than one owner you’ll get that information from these records.  Those co-owners may be liable for the payment of your judgment.

You can do what is known as a “reverse index search” on the owners name in the assumed name records.  This search reveals any other businesses your judgment debtor may own or co-own.  Those additional businesses may provide sufficient resources for the collection of your judgment.

Conclusion

As a judgment creditor, you owe it to yourself to check the assumed name records for your judgment debtor.  The information you find just may be the breakthrough you need to collect your Texas judgment.

In Texas, a judgment debtor’s property is subject to seizure (called “levy and execution”) unless it is exempted by the Texas Constitution, statute or other rule of law.  The following is a brief, nonexclusive list of exemptions.  In other words, these are not all the exemptions available in Texas.  But, these are the ones you will most likely encounter in collecting a Texas judgment against an individual.

1.  The homestead

2.  Personal property of various categories up to the aggregate fair market value of $30,000 for an individual and $60,000 for a family

3.  Current wages for personal services (except for the enforcement of court-ordered child support)

4.  Doctor prescribed health aids of either the judgment debtor or his dependents

5.  Certain retirement benefits and funds

6.  Workers’ compensation payments

7.  Cemetery lots

8.  Property that the judgment debtor sold, mortgaged or conveyed in trust, if the purchaser, mortgager or trustee points out other property of the judgment debtor sufficient to satisfy the execution

9.  Assets in the hands of a trustee of a spendthrift trust for the benefit of the judgment debtor

10.  Insurance benefits

11.  Alimony, support or separate maintenance payments received for the judgment debtor’s support or the support of the judgment debtor’s dependents

12.  Judgments of Texas courts (A turnover order is an effective way to reach a Texas court judgment owned by the judgment debtor but it is the subject of a future article)

Remember, this is not an exhaustive list of exemptions.  It is only a list of those you will most likely encounter when pursuing a Texas judgment against an individual.

The Texas judgment lien is a powerful tool in the judgment collection process. Its power lies in its ability to attach your judgment debt to the debtor’s real property. But, there are limitations to that power.

It Only Attaches to Some Real Estate

A Texas judgment lien only attaches to real estate your debtor owns. It has no effect on the debtor’s personal property.

Now suppose your debtor does own a home in Texas. Your would, of course, assume that your lien attaches to that home. But, it doesn’t. Texas exempts your debtor’s personal residence from the power of a judgment lien. It’s called a “homestead exemption.”

Even though your lien doesn’t attach to the debtor’s homestead, it does create a cloud on the debtor’s title to his home. In other words, you can make it difficult for the debtor to sell his home because your lien creates a question of ownership.

Because of this “cloud” you must release the lien as to the homestead. You don’t have to do it until the debtor asks you to do so. But, if the debtor asks, you have to release it. If you don’t, the debtor can sue you for damages.

It Attaches to Later Acquired Real Estate

Your judgment lien isn’t limited to real estate the debtor owns on the date you create the it. It also applies to any non-homestead real property he acquires at any time after you obtain a judgment. So, if your judgment debtor buys a rent house after you create obtain a judgment, your lien does attach to that rent house.

It Attaches to Inherited Property

When a person dies in Texas, his property immediately becomes the property of his heirs. But, the property is first subject to payment of the debts of the deceased. This is true whether the person dies with or without a will.

If you have a judgment against one of the heirs, it immediately attaches to the inherited property. An executor of the deceased person’s estate can, however, sell the property free of your lien. But, he can only do so to pay debts of the deceased.

The Texas Judgment Lien is a powerful collection tool. But, it does have limitation. Being aware of both its power and its limitations will help you make the best use of this tool in your collection efforts.