What You Absolutely Must Know If You Owe a Judgment in Texas

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Introduction

How Long Does a Texas Judgment Stay in Effect?

Will the Court Garnish My Wages?

Will the Court Seize My Retirement Accounts?

• Retirement Benefit Exemptions
• General Exemptions
• Exemptions from Garnishment

Will the Court Seize My Checking Account, Savings Accounts or Other Bank Accounts?

Will the Court Take My Home?

• Rural Homestead
• Urban Homestead
• Business Homestead
• Creating and Abandoning a Homestead

Does a Judgment Put a Lien on My Home?

Can I Sell My Homestead Without Paying the Judgment?

Can the Judgment Creditor Seize My Other Real Estate?

Can the Judgment Creditor Take My IRS Tax Refund?

Can I Still Settle with the Judgment Creditor If a Judgment Has Been Awarded?

I’ve Paid the Judgment. What Documents Do I Need to Get as Proof that the Judgment is Paid in Full?

Conclusion

Will the Court Seize My Retirement Accounts?

In Texas, certain personal property can’t be seized or garnished to pay a judgment. In other words, some property is “exempt.” Since this question asks specifically about retirement accounts, I’ll deal with those exemptions first. Following that explanation, I’’ll deal with the general exemptions in Texas.

Retirement Benefit Exemptions

Under current Texas law, the following retirement benefits are exempt from seizure to pay a Texas judgment:

1. Rights under a stock bonus plan.
2. Pension and profit-sharing plans, including retirement plans for self-employed persons.
3. Individual retirement accounts or annuities.
4. Annuities or similar contracts purchased with assets distributed from any stock bonus, pension, profit-sharing, or retirement plan and any retirement annuity or account described by 26 U.S.C. §§ 403(b), 408A.
5. Any health savings account described by 26 U.S.C. § 223.
6. The right to assets held in or to receive payments under a government or church plan, as long as the plan qualifies under the federal Employee Retirement Income Security Act of 1974, 29 U.S.C. §§1001–1461. Tex. Prop. Code §42.0021(a).

Federal retirement benefits are also exempt under various federal statutes. Such federal benefits include:

1. Social Security benefits, 42 U.S.C. § 407(a).
2. Veterans benefits, 38 U.S.C. § 5301.
3. Civil service retirement benefits, 5 U.S.C. § 8346.

General Exemptions

Texas exempts personal property from forced sale up to an aggregate fair market value of $60,000 for a family or $30,000 for a single adult. Such exempt property includes:

1. Home furnishings, including family heirlooms.
2. Provisions for consumption.
3. Farming or ranching vehicles and implements.
4. Tools, equipment, books, and apparatus, including boats and motor vehicles, used in a trade or profession.
• Texas courts have held that, in order to qualify as a tool of your trade or profession, a tool or apparatus must be essential to the practice of that trade. Segraves v. Weitzel, 734 S.W.2d 773, 775–76 (Tex. App.—Fort Worth 1987, no writ), citing Simmang v. Pennsylvania Fire Insurance Co., 112 S.W. 1044 (Tex. 1908), and McMillan v. Dean, 174 S.W.2d 737 (Tex. Civ. App.- Austin 1943, writ ref’d w.o.m.).
• Texas bankruptcy courts, however, have interpreted the statute differently. They hold that the tool must merely be useful in your trade, not peculiarly adapted to it. In re Erwin, 199 B.R. 628 (Bankr. S.D. Tex. 1996); In re Legg, 164 B.R. 69 (Bankr. N.D. Tex. 1994).
5. Wearing apparel.
6. Jewelry, not to exceed 25 percent of the $60,000/$30,000 limit.
7. Two firearms.
8. Athletic and sporting equipment, including bicycles.
9. A two-wheeled, three-wheeled, or four-wheeled motor vehicle for each member of the family who holds a driver’s license or who is not licensed but relies on another person to drive the vehicle for him.
10. The following animals and forage on hand for their consumption:
• Two horses, mules, or donkeys, and a saddle, blanket, and bridle for each;
• Twelve head of cattle;
• Sixty head of other livestock;
• 120 fowl
11. Household pets.

The exemptions listed above are found in Tex. Prop. Code §§42.001, 42.002. But, in addition to those exemptions, the following assets are also exemption. These, however, are not included in the aggregate limitations listed above. They are:

1. Current wages for personal services.
2. Professionally prescribed health aids.
3. Alimony, support, or separate maintenance.
4. Certain religious books. Tex. Prop. Code §42.001(b)
5. Unpaid commissions for personal services not exceeding 25 percent of the aggregate limitation. Tex. Prop. Code §42.001(d).
6. Qualified college savings plans. Tex. Prop. Code §42.0022.
7. The cash value and proceeds of an insurance policy or annuity contract issued by a life, health, or accident insurance company, including a mutual company or fraternal benefit society or an annuity or benefit plan used by an employer or individual. Tex. Ins. Code §1108.051.
• This exemption is unlimited and is in addition to all other exemptions. Tex. Ins. Code §1108.001.

Exemptions from Garnishment

Garnishment is a special remedy that allows your judgment creditor to get any property that belongs to you but is held in the possession or control of a third party. Garnishment is explained more fully in connection with the next question. But, since we’re dealing with exemptions, it’s appropriate to mention exemptions to garnishments at this stage. So, in addition to all of the above listed exemptions, the following are exempt from garnishment:

1. Workers’ compensation benefits.
• Death and personal injury benefits paid under workers’ compensation laws are exempt. Tex. Lab. Code §408.201.
2. Government employees’ retirement benefits.
• Pensions, annuities, and retirement benefits of government employees are usually exempt but you’ll need to check the applicable statute. See, e.g., 5 U.S.C. §8346; Tex. Gov’t Code §811.005 (retirement annuities and certain other benefits of state employees), §821.005 (payments by Teacher Retirement System). But see Perkins v. Perkins, 690 S.W.2d 706, 708 (Tex. App.-El Paso 1985, writ ref’d n.r.e.) (military and civil service retirement benefits not exempt in some circumstances).
3. Welfare and social security benefits.
• Most state welfare benefits paid or payable are exempt. See, e.g., Tex. Hum. Res. Code §31.040 (aid to families with dependent children), §32.036(b) (medical assistance). Federal social security benefits are likewise exempt. 42 U.S.C. §407(a).
4. Trust or other funds in your name but that belong to someone else.
• Neither trust funds nor funds of another deposited in your name are subject to garnishment by your creditors. If your depository institution (i.e., bank) fails to raise this defense on your behalf, it may become liable to you. Southwest Bank & Trust Co. v. Calmark Asset Management, 694 S.W.2d 199, 200–01 (Tex. App.—Dallas 1985, writ ref’d n.r.e.).
5. Property held by the state.
• Property held by the state is exempt from garnishment as a matter of public policy and under the doctrine of sovereign immunity. Morris v. Texas Department of Corrections, 762 S.W.2d 667, 669–70 (Tex. App.—Tyler 1988, no writ) (sovereign immunity); Addison v. Addison, 530 S.W.2d 920, 921 (Tex. Civ. App.-Houston [1st Dist.] 1975, no writ) (public policy); but see Tex. Civ. Prac. & Rem. Code §63.007 (waiving sovereign immunity for inmate trust funds). Sovereign immunity is determined on a case-by-case basis.
6. Money due original contractors and subcontractors.
• If you’re an original contractor, your creditors may not garnish money due you or your surety. Likewise, a creditor for your subcontractor may not garnish money due to the subcontractor. Tex. Prop. Code §53.151.

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