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A Houston Chronicle investigation found that debt collection lawsuits against the Texans were skyrocketing.
This means judges face pressure to move debt lawsuits quickly to keep their cases manageable. With just minutes to consider cases, judges can miss important details, consumer advocates say.
Rapid-fire justice focuses on whether defendants can get fair treatment. These concerns prompted the Texas Supreme Court to step in to offer solutions.
Here are nine things you need to know about how this crisis started and how you can ensure your bank accounts aren’t seized by creditors.
Nearly 3 million costumes
Hundreds of thousands of Texans are sued every year for unpaid credit cards, medical bills, student loans and other debts. For the first time in history, the 374,000 debt lawsuits filed in the Lone Star State last year accounted for nearly half of all civil cases in the state.
In fact, since 2012, nearly 3 million debt collection lawsuits have been filed against Texans by debt collectors.
Most Harris County Civil Lawsuits
Need more evidence of the tide of debt overwhelming Texas civil courts? Consider this: Debt collection lawsuits filed in Texas rose 73% from 2012 to 2021, according to an analysis of state data by the Houston Chronicle.
What is the situation here in the Houston area? Well, last year in Harris County, debt claims accounted for 72% of all civil lawsuits filed, according to January Advisors, a data science consulting firm in Houston.
The best courts for collectors
Let’s talk about why this is happening. Recent changes in state law have given debt collectors a better chance of getting faster dispositions and a less costly litigation process if lawsuits are filed in justice of the peace courts. The filing fees are cheaper in these courts. This is why most debt cases are now filed there. Last year, justice of the peace courts reported an overwhelming majority of debt lawsuits filed in Texas civil courts.
Justices of the peace, as they are called, preside over marriages, misdemeanors and absenteeism. Many justices of the peace are not lawyers.
What the judges say
So why is all of this so concerning? Judges say it can be difficult to deliver justice when tens of thousands of cases flood their courts.
The Chronicle interviewed justices of the peace from several of the state’s largest counties about the impact of the high volume of debt collection lawsuits. Some lamented that their courts had been turned into debtors’ courts and undermined public confidence in the justice system. “It makes me sick,” said Bexar County Justice of the Peace Roger “Rogelio” Lopez.
What if the defendant is not present?
Here is one finding from our investigation that stood out regarding the seizure of bank accounts:
Cases settled by default judgment have increased since 2012. This means that more cases are decided with defendants not present to dispute a claim, and the court cannot weigh both parties equally before issuing a judgment. The number of default judgments in the Houston area and other large Texas counties totaled nearly 74,000 cases in 2021, an 86% increase from 2012.
Whenever a default judgment is filed against a debtor, that debtor may – often unknowingly – be subject to seizure of their bank account in order to satisfy the debt judgment. Most defendants in debt collection lawsuits do not have an attorney to defend themselves.
For example, a single mother in Houston had alimony funds withdrawn from her bank account. She recovered the funds after claiming exemptions allowed by Texas law. Texas law prohibits debt collectors from seizing a debtor’s alimony, retirement and social security benefits, and unemployment funds.
How bad could this get?
Could this flood of debt lawsuits get worse? Economic indicators show that people are accumulating more and more debt. Americans racked up $52 million more in credit card balances in the fourth quarter of last year — the biggest quarterly increase in 22 years, according to the New York Federal Reserve Bank. Also, credit card companies should increase late fees and penalties to keep pace with inflation and other factors. In 2020, fees topped $12 billion.
What can Texas do about it?
What is being done to solve this problem? The Texas Supreme Court has ordered debt collectors to inform debtors of their rights to protect funds and assets that are exempt. So, whenever a debt collector attempts to seize or freeze bank accounts, they must inform debtors that they have these rights.
How to protect yourself
How can you avoid being sued or having your bank accounts seized? – Keep a watchful eye on your credit balances and debts. If you notice that your credit account has been “charged”, you may be subject to a debt collection lawsuit. If you are sued, try to contact the court and show up at your hearing to defend your rights. You can also seek legal assistance from a local debt clinic or a law firm that provides services to the public. You can also ask the court to provide you with legal resources.
Can you sue a debt collector?
What if a debt collector has been abusive or continues to call and harass you? You may be able to sue in federal court under the Fair Debt Collection Practices Act. Federal law contains an attorney’s fee provision that allows your attorney to receive fees for representing you in court.
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