If you have recently font through a judgment debtor examination and lost, your mind might be racing with questions such as;
- Will I still have a place to live after property seizure?
- Will I still have means of transport or will my car be seized?
- Will my property be safe?
The answer to all these questions is “yes” especially if you reside in the state of Texas. However, it may not be the case as with other states as exempt property varies from state to state. Your attorney should be in a position to ease the debt collection process.
This article discusses what assets can be seized in a judgment and examines different types of assets to find out which ones are exempt from the collection and which ones are not.
What is a nonexempt property in a judgment?
Non-exempt property refers to any property that can be claimed by creditors when trying to satisfy a borrower's debt. To do this, a trustee liquidates the debtor's property for the benefit of the creditor.
There are five types of nonexempt property: real estate, personal property, business property, testamentary property, and government property. When the government or the court issues a judgment against you or your business, the judgment creditor can seize any of these assets as payment for your debt. If you have any assets that are specifically not listed under the nonexempt list, then those assets are considered “exempt” and cannot be seized by the judgment creditor.
The court schedules a hearing to determine what is exempt and what should be seized in the case of a judgment being awarded. You can find more information on a nonexempt property on this website.
What can be seized in a civil judgment?
Properties that a debtor gives up during a judgment include:
- Musical instruments of high value. The only exemption on these items is if the debtor is a professional musician.
- Stocks, cash, bonds, bank accounts, and any other investments.
- Vacation homes
- Cars that are not the primary mode of movement for example a second car
- Collection of valuable items such as coins, stamps, etc.
- Family heirlooms
- Future assets such as commissions, royalties, and insurance payouts that the debtor expects to receive.
What cannot be seized in a civil judgment?
If you are in the unfortunate position of being sued and losing your home, car, or other valuable assets to the judgment, then you must be wondering which of the property that you own is exempt during judgment. Below is a list of most, if not all, items that are exempt during and after your judgment debtor examination.
- Anything that is not money-related (like a painting or antique) cannot be seized by the court in a judgment. This means that if you own a valuable painting, for example, it is safe from seizure by the judgment creditor. Similarly, anything that is exempt from execution (like an exemption under state law) will also be protected from seizure by the court.
- Property that is owned jointly with someone else may not be seized by the judgment creditor. This means that even if you are solely responsible for a debt or liability, your partner's property may still be safe from seizure.
- Any property that was obtained using illegal means (like theft or fraud) cannot be seized by the court in a judgment. This means that even if your assets were taken through extortion or deception, they will still be protected from seizure by the court.
- Necessary clothing.
- jewelry, up to a certain value.
- Motor Vehicles, especially primary means of transport but up to a certain value.
- Pensions
- A Portion of earned wages even if they are not paid.
- Public benefits include social security, public assistance (welfare), and unemployment compensation that has accumulated in a bank.
- A certain value of the debtor’s tool of the trade. These may include equipment, tools, vehicles, or books.
- Damages are awarded to the debtor as a form of compensation for personal injuries.
- Household appliances.
- Primary residence, whether rural or urban.
- Consumption provisions such as farm implements and livestock.
- College fund savings
- Sporting and athletic equipment
- Retirement accounts and plans
The list above has some things that are exempt from debt collection during a judgment. However, it is important to note that exempt property varies from state to state. The list above is specific to Texas state. In this website, you can find more about Texas Bankruptcy exemptions.
Asset protection plan
Once you've gone through a debt collection lawsuit and either lost or won, you might want to consider an asset protection plan. This will help you and your business in the future by protecting it against creditors and lawsuits. Minimizing these risks means you have a high chance of running your business successfully.
Importance of an asset protection plan
The main goal of a protection plan is to make sure that the risk surrounding your property and business from creditor claims is reduced.
An asset protection plan employs legal strategies that have been put in place before claims and lawsuits arise therefore deterring potential claimants or preventing seizure should a judgment occur. The likelihood of the plan being strong depends on how long it has been in existence.
Asset protection plans use strategies such as separating legal arrangements and structures. These include setting up trusts, partnerships, and corporations. Depending on the type of assets you have and the kind of creditors likely to lay claims against you, these structures work best.
Whether a small business owner or an already established plan, when it comes to judgments and avoiding debt collection, having an asset protection plan in place will be beneficial. More on asset protection on this website.
Conclusion
There are a couple of things to remember when it comes to debt collection on personal property in Texas. Exemptions against property seizure are many and selling personal property does not require you to hold a title document. To help pay a judgment, you can sell off property and businesses that are exempt and pay off your debt.
This article helps you understand that not all assets and properties that you own are subject to seizure during debt collection and in some cases, even things like real estate, businesses, and cars are exempt from seizure.
Aidan has been writing about personal finance for over 6 years. Prior to this, he worked as a Corporate Finance Analyst where he specialized in Due Diligence, Company Valuations and more. He is a CFA charterholder.
