Default Judgment Requirements
A default judgment is awarded in a civil lawsuit when one party named in the lawsuit fails to respond to the lawsuit or to appear at the hearing. In Texas, the petitioner — the person who files the lawsuit — must give legal notice to the other party — the respondent. The respondent has an opportunity to file an answer or general denial as a response to the petition. The respondent has a specific time frame for filing the answer or denial. If the respondent does not respond, the petitioner can ask for a default judgment based solely on a non-response. After issuing a judgment, the Texas court will wait 30 days before issuing a writ of execution that makes the judgment final.
One way to collect on default judgments in Texas is by seizing and selling real property that is non-exempt. A person’s homestead, including 100 percent of the equity, is exempt from judgment collections in Texas. Texas laws consider homesteads a question of intent. Vacant lots may be classified as homesteads if the owner intends to build a home there. Non-exempt real property includes an urban home with more than 10 acres of continuous land, with improvements; a rural family home with more than 200 acres and improvements or a rural single-adult home with more than 100 acres and improvements. Rental property is not exempt from judgments in Texas. Creditors can seize and sell a debtor's rental property to satisfy a default judgment.
Personal property with a value that exceeds $60,000 for a family or $30,000 for a single adult, not including liens, may be used to collect on a default judgment in Texas, as long as it is not exempt. Exemptions include home furnishings, family heirlooms, wearing apparel, tools and equipment used for trade, athletic and sporting equipment, two firearms, farming or ranching implements and vehicles, 60 head of livestock other than cattle, 12 head of cattle and a two-, three- or four-wheeled vehicle.
Creditors who win default judgments against debtors in Texas often file an abstract of judgment with the real property records. The abstract of judgment is a notice that remains for at least 10 years, telling the public that a judgment exists. If the debtor voluntarily sells real property that is exempt from judgment, such as homestead, the presence of an abstract on file may be enough to warrant the title company to demand that the judgment be paid before or at closing. Even though judgments are not liens against real property in Texas, the title company may have difficulty declaring a clear title with a judgment on file.
Cash and Inventory
In Texas, a debtor’s business inventory and cash flow is subject to collection from a judgment. Cash in a personal bank account is another way in which creditors may collect on a default judgment. Bank accounts may be levied and valuable business inventory may be sold to pay off a judgment.