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Dallas Lawyer Collections
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Judgments
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Liens
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Receivables
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Defaults
Judgments
Once a money judgment is rendered and signed, the winning party (now the judgment
creditor) is entitled to initiate procedures to enforce it. The types of
enforcement mechanisms that are available depends on a number of factors,
including the amount of time that has elapsed since rendition, and whether
the judgment debtor has suspended enforcement of the judgment pending appeal,
among others. In some cases, the defendant, now a judgment debtor, or the
liability insurance carrier will arrange to pay the judgment. In other
situations, the recalcitrant judgment debtor owns no nonexempt assets, or the
existence and location of the judgment debtor's nonexempt property is not
readily ascertainable. In these situations, the judgment creditor should take
the following actions in order to preserve the judgment creditor's rights and
in an effort to obtain satisfaction of the judgment:
1. Record an abstract of judgment in the judgment records of every county
where the judgment debtor may own an interest in real property, currently or
in the future, to perfect a lien on that interest.
2. Have a writ of execution issued and delivered to a sheriff or constable to
levy on and sell some nonexempt property belonging to the judgment debtor and
apply the proceeds of the sale to payment of the judgment.
If the judgment is not satisfied by these efforts, the
judgment creditor has other tools to aid collection, including:
Discovery in aid of execution. If the judgment debtor's financial affairs and
holdings are unknown or unclear to the creditor, as long as the enforcement
of the judgment has not been suspended by supersedeas or court order, the
creditor may serve the judgment debtor with postjudgment interrogatories,
depose the judgment debtor, or use any other discovery device available to
litigants under the Texas Rules of Civil Procedure, in an effort to find
nonexempt assets owned or controlled by the debtor.
Turnover statute. If the creditor knows or learns through discovery that the
debtor possesses or controls nonexempt property, but that property cannot be
readily attached or levied on by ordinary legal process, the creditor can ask
a court to assist by ordering the judgment debtor to ``turn over'' specific
property to a sheriff, constable, or receiver to be sold or otherwise applied
to satisfy the judgment.
Garnishment. If a third party is in possession of the judgment debtor's
personal property or is indebted to the judgment debtor and the property or
indebtedness is not exempt from legal process, the judgment creditor may
``garnish'' the property or funds in the hands of the third party Regardless
of the collection method, the target is always some asset belonging to the
judgment debtor that is not exempt from the judgment creditor's claim. The
exemption provisions are numerous and complex, providing many exceptions and
restrictions.
Lien on Real Property
Usually, when payment of a judgment is not forthcoming, the judgment
creditor's first step is to prepare and record an abstract of the judgment,
commonly called an ``AJ''. Proper filing of an AJ perfects a lien on the real
property then owned or thereafter acquired by the judgment debtor. A district
or county court clerk may prepare and issue an AJ for judgments rendered in
district and county level courts for a small fee, on the request of the
judgment creditor or the creditor's agent, attorney, or assignee. While some
courts provide their own printed abstract forms, an abstract prepared and
verified by the creditor or its attorney is the preferred practice. An
abstract of judgment in a small claims or justice court, however, may be
prepared only by an attorney, not by the judgment creditor. A judgment
creditor proceeding without counsel in a small claims or justice court must
apply to that court for an abstract of judgment to be prepared by the justice
of the peace or judge who rendered the judgment.
An abstract of judgment is recorded in the judgment
records as kept by each county clerk in Texas. Typically, the judgment
creditor will present an AJ to the county clerk of the county where the
judgment debtor has a principal residence and to the clerks of any other
county where the judgment debtor may then own or in the future acquire an
interest in real property. On payment of the appropriate fee, the county
clerk will record the AJ in the judgment records, note the day and hour of
the filing, and enter in the alphabetical index to the judgment records the
name of each plaintiff and defendant in the judgment and the location (by
volume and page numbers) in the records where the abstract is recorded. With
some exceptions, once an abstract of judgment is duly recorded and indexed in
a county, a judgment lien attaches to the judgment debtor's real property in
that county.
Properly indexing a recorded abstract of judgment is
of the utmost importance to the creation of the judgment lien. The normal
presumption that a public official properly performed his or her duties does
not apply to the creation of a judgment lien. Additionally, recording and
indexing an abstract of judgment will not perfect or create a lien on the
debtor's real property in the following situations:
1. When the judgment has become dormant. Recording an abstract of a judgment
that has become dormant is ineffective to establish a judgment lien. A
judgment becomes dormant unless enforcement by levy of execution is attempted
at least once in the first 10 years after its rendition. After that, the
judgment will become dormant unless a second writ of execution is issued
before the lapse of 10 years after issuance of the first writ. However,
a dormant judgment can be revived by an action for debt brought not later
than the second anniversary of the date that the judgment became dormant.
2. When the court finds the lien offers no substantial increase in the
security for payment. Even though a judgment debtor has posted security, or
is excused by law from posting security, to supersede enforcement of a
judgment pending appeal the judgment creditor nevertheless may record
an abstract of judgment. But the judgment debtor, having superseded the
judgment, may apply for a finding by the appellate court that the creation of
the lien would not substantially increase the degree to which the judgment
creditor's recovery would be secured when balanced against the costs to the
judgment debtor after the exhaustion of all appellate remedies. If successful
in obtaining such a finding, the debtor may file a certified copy of the
finding in the real property records of each county where the abstract has
been filed and, thus, nullify its effect and prevent perfection of a judgment
lien
In connection with the exception based on court's
findings, it should be noted that the judgment creditor may present evidence
to the court to convince it to withdraw the finding. By filing a certified
copy of the withdrawal order in the real property records, the judgment lien
attempted by the recorded abstract comes into being as a perfected lien.
The perfection of a judgment lien puts the judgment creditor ahead of any
subsequent claimant of an interest in or right to property of the
debtor. Because the lien's recordation and indexing puts any party
dealing with property owned or to be owned by the judgment debtor on notice
of the judgment creditor's interest, potential purchasers and mortgagees
usually will insist that the judgment creditor's claim be extinguished or
otherwise released or subordinated before consummating any transaction
involving the property. Thus, the debtor, at some point in time, may be
compelled to obtain a release of lien in order to buy, sell, or mortgage a
property. Furthermore, the filing of an abstract may cast a cloud on the
title of the debtor's homestead and this situation may be continued by the
judgment creditor's periodic attempts to levy a writ of execution, impairing
the debtor's ability to sell or encumber the property until a release of lien
is obtained.
The usual principle of ``first in time'' to record
determines the priority of judgment liens on the judgment debtor's real
property. However, with respect to real property acquired after several
abstracts have been recorded and indexed, the judgment liens attach
simultaneously and, thus, share the proceeds prorata.
A perfected judgment lien has priority over any previous but unrecorded
conveyance, mortgage, or deed of trust, absent actual notice to the judgment
creditor. This formulation of the judgment lien's priority status calls
attention to the following situations in which the lien is not superior and,
thus, cannot defeat another party's claim to the property:
1) Possession and control of the property by a person other than the judgment
debtor may be so openly and unequivocally at odds with unfettered ownership
by the judgment debtor as to impute notice to the creditor of some
outstanding interest or equitable claim.
2) Another party may have equitable title or an equitable right to title under
an unrecorded contract for a deed. The statute that addresses the effect of
unrecorded instruments applies only to conveyances, mortgages, and deeds of
trust; it does not say that an unrecorded executory contract is void against
creditors without notice. There is no requirement that an executory contract
for a deed must be recorded. And, in the usual situation when the judgment
debtor has sold property under a contract for a deed, the purchaser is in
possession of the property and that possession should be deemed notice to the
judgment creditor of the equitable rights of the purchaser.
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