I am considering filing a lawsuit to collect a sizable and undisputed contract debt; however, the intended defendant currently does not own assets which are sufficient to satisfy the sought-after judgment. What considerations should I keep in mind when deciding whether to file suit?
First, before filing suit in Texas, a potential plaintiff should know that Texas is a very “debtor-friendly” state. Texas law makes it quite difficult to collect from recalcitrant judgment debtors.
Second, bear in mind that, typically, when a person of modest means finally does acquire (through saving, inheritance, etc.) a significant amount of cash, it is quite likely that the person will purchase a home where he and his family can live. Texas law will (in almost all instances) prevent a judgment creditor from using a judgment debtor’s homestead to satisfy a judgment.
Third, if a judgment against an insolvent debtor is significant, and there is no reasonably foreseeable way the judgment debtor will ever be able to pay the judgment, the judgment debtor’s next stop, after leaving the civil court that issued the judgment, might just be federal bankruptcy court.
Fourth, if a Texas judgment creditor is able to successfully avoid the homestead and bankruptcy hurdles, an abstract of judgment can be filed in any (and every) county where the judgment debtor owns real property. The abstract of judgment will then have the effect of a lien against any real property owned by the judgment debtor in that county. Of course, the judgment creditor will still have to wait until the property is sold/transferred before the lien will have any real effect in satisfying the judgment. Abstracts of judgment are valid for ten (10) years, and can be renewed.
Finally, very few cases are guaranteed “winners.” It is a rare case, indeed, that looks as good after litigation as it did prior to litigation. And don’t forget attorney fees. A potential plaintiff should always ask himself before filing suit: “How much of my money (in the form of attorney fees and costs) am I willing to risk in my attempt to collect this debt?” Furthermore, to make matters worse, potential plaintiffs should also remember that if they lose the case, that it is possible, under some circumstances, for a successful defendant to obtain a court order that requires the plaintiff to pay some or all of the defendant’s attorney fees and costs!
Litigation is a tool to be used in appropriate cases. However, lawsuits should not be filed without a serious – and realistic – pre-suit analysis of not only the legal merits of a case, but also of the practical and economic realities of the case.
For more information on this topic, click here to: Contact Lapin Law Offices
Lapin Law Offices, P.C.
5001 Spring Valley Road, Suite 400 East
Post Office Box 802234
Dallas, Texas 75380
Disclaimer: The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and, shall not constitute legal advice or create an attorney-client relationship. The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction. Do not rely on the information contained in this publication for any purpose. If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.