Collecting a judgment in Texas can be challenging. But, it is doable. Your success, however, will require an aggressive use of all available judgment collection tools. The first and easiest tool is also the most overlooked. It is the judgment lien.
The Basics of a Lien
A lien is a pretty simple concept. Most people understand it in the context of borrowing money and using collateral to secure the payment of a note. In other words, a lien is a claim against an asset for payment of a debt. That idea isn’t any different in the context of a judgment. A judgment is debt. That judgment debt can create a lien on the judgment debtor’s assets. But, a Texas judgment doesn’t automatically create a lien. The judgment creditor must do something to create a lien.
A Judgment Lien Requires an Abstract of Judgment
Creating a lien based on a Texas judgment is simple to do. You just record an “abstract of judgment” to create a lien. An abstract of judgment is nothing more than a summary of the judgment. It itemizes the amount of money the judgment debtor owes you. It also lists the amount due for court costs, attorney’s fees and interest. You record the abstract in the deed records of the county clerk’s office. You need to file it in each county where your judgment debtor owns real estate. The act of recording the abstract creates a judgment lien on the debtor’s real estate in that county.
An example will help in understanding the process.
Let’s suppose you have a judgment against a defendant who owns real estate in Dallas and Houston. You record an abstract of your judgment in Harris County but not in Dallas County. You now have attached a judgment lien to the debtor’s real estate in Harris County. But, the land he owns in Dallas County is not subject to your judgment lien. To attach the lien to his property in Dallas County, you have to file your abstract in Dallas County.
Here’s a video that explains the abstract of judgment.
Renewing a Texas Judgment Lien
Recording the abstract of judgment in the real property records of any Texas county creates a judgment lien on the debtor’s nonexempt real estate in that county. The lien is good for ten years, unless the judgment becomes dormant in less than ten years from the creation of the lien. If the judgment does become dormant before the 10-year period runs, the judgment lien created by filing the abstract ceases to exist.
What you have to understand is that your judgment has a life-span of ten years too. But, the life-span of the judgment operates separately from the life-span of the lien you create with the abstract of judgment. The judgment is valid for ten years from the date the judge signs it. The lien is valid for ten years from the date you record the abstract. Those dates can be the same but in most cases they are not.
Your judgment becomes dormant if you do not issue a writ of execution within ten years from the date it was signed by a judge. Your judgment will lose its priority position in the deed records if you allow it to become dormant. It is crucial that you calendar the recording of your abstract so that you can keep your judgment lien alive. You can keep it alive by:
- Recording a new abstract before the 10-year anniversary date of the previous abstract; and
- Issuing a writ of execution on the judgment before it becomes dormant.
The Power of a Texas Judgment Lien
A case involving Pennzoil Company and Texaco demonstrates the potential power of the Texas judgment lien, Texaco, Inc. v. Pennzoil Co., 626 F.Supp. 250 (S.D.N.Y. 1986), rev’d 107 S.Ct. 1519 (1987). The case made national news in the mid-1980s.
Pennzoil won an exceptionally large judgment against Texaco and then abstracted and recorded it in every county in Texas. By doing so, Pennzoil perfected its judgment lien against every piece of real property Texaco owned in Texas.
Texaco quickly realized the impact of the judgment lien on its business operations and filed in federal court challenging the constitutionality of Texas judgment lien laws. The case was ultimately heard by the United States Supreme Court. The Supreme Court ruled that the federal courts should not interfere with the judicial system in Texas. As a result, the only way Texaco could prevent Pennzoil from taking further action to perfect its lien was to file for bankruptcy protection.
Practical Tips for Properly Using a Texas Judgment Lien
An abstract of judgment is an inexpensive way to make sure you eventually collect of your judgment. It is a passive collection tool. But, it is an effective collection tool. After you prepare an abstract of your judgment, you want to record it in the following counties:
- The county where the judgment debtor lives.
- The county where the judgment debtor works.
- The county where the judgment debtor’s family lives (inheritance possibilities).
- The county where the judgment debtor owned property in the past (he may try to invest again).
The key to using an abstract of judgment is to monitor your time-frames carefully. You want to keep the judgment from going dormant and you want to keep your priority position with the lien. To make sure that happens, you should request a writ of execution and a new abstract no later than nine years after the date of the judgment. Starting early ensures that you complete all the required procedures well in advance of the 10-year anniversary of the judgment and the lien.