By Gary Yevelev
On April 9, 2020, the Supreme Court of Texas issued Emergency Order No. 20-9054 related to proceedings to collect “consumer debt,” as defined under the Texas Finance Code. With the exception of the Order’s provision regarding service of writs of garnishment, the Order is effective immediately and will expire on April 30, 2020, unless extended by the Court.
The Texas Finance Code defines consumer debt as an actual or alleged obligation that is primarily for personal, family or household purposes and that arises from an actual or alleged commercial transaction.[1] The Order affects the following kind of proceedings to collect consumer debt:
| [1] Tex. Fin. Code § 392.001(2). [2] Tex. Civ. Prac. & Rem. Code § 63.003(a); Tex. R. Civ. P. 657–79. [3] See Order ¶ 3(a). [4] See Order ¶ 3(c). [5] See Order ¶ 4. [6] Tex. Civ. Prac. & Rem. Code § 31.002(b)(3). [7] See Order ¶ 3(b). [8] Tex. R. Civ. P. 239. [9] See Order ¶ 3(d). [10] See Order ¶ 3(e). [11] See Tex. R. Civ. P. 165(a). |
- Garnishment: A writ of garnishment is an order issued by a court directing a third party who possesses property or is indebted to a debtor—usually the debtor’s employer or a financial institution where debtor has an account—to turn such property over to the creditor.[2] The Order provides that courts may continue to issues writs of garnishment but that these writs may not be served on the third party (the “garnishee”) until May 7, 2020.[3] The Order also provides that where a third party has already received a writ of garnishment, the parties are “strongly encouraged” to reach an agreement regarding the garnishment, and courts are “encouraged to aid and facilitate a quick adjudication.”[4] In practice, this is likely to mean that courts may direct parties either challenging or seeking to enforce a writ of garnishment to work out a resolution, and may be less likely to entertain motions or schedule a hearing regarding any such dispute. However, the Order provides that a court may permit the issuance and service of a writ of garnishment in cases where the court determines that “the actions of the judgment defendant pose an imminent threat of fraudulently concealing or absconding with funds.”[5]
- Receivers: Chapter 31 of the Texas Civil Practice & Remedies Code permits Texas courts to grant a creditor’s application to appoint a receiver, which is a third party authorized by the court to collect a debtor’s nonexempt property, sell the property, and pay the proceeds to a creditors with judgments for the consumer debt.[6] The Order provides that receivers that have been appointed under Chapter 31 cannot freeze any financial accounts of a debtor until April 30, 2020.[7] However, receivers that have been appointed may otherwise “remain active” in the collection of a debtor’s non-exempt property.
- Default Judgments: A creditor may generally request that a court issue a default judgment against a debtor if the debtor has not timely responded to a suit.[8] However, the Order provides that in a legal action to collect a consumer debt, a court may not set a hearing on a request for a default judgment until April 30, 2020.[9] The Order extends the time for a consumer debtor to respond to such a suit until April 30, 2020.[9]
- Cases May Not be Dismissed in the Interim: The Order prohibits Courts from dismissing any actions to collect a consumer debt for “want of prosecution” while the Order is in effect.[10] This means that where a creditor has already filed a legal action on a consumer debt, the creditor’s failure or inability to take further steps to pursue the legal action against a consumer debtor while the Order is in effect cannot be a basis for dismissal of the case.[11]
Meet Gary
Meet GaryGary Yevelev focuses on commercial and bankruptcy litigation. Gary complements his advocacy with a thoughtful approach to litigation management, drawing on his experience as a database administrator to maximize efficiency for the firm’s clients. During law school, he honed his courtroom skills through involvement with indigent criminal defense and bankruptcy moot court. Gary previously served as a judicial intern to the Honorable Lee Yeakel of the United States District Court for the Western District of Texas, a role in which he observed trial and court proceedings, helped craft jury instructions, and assisted the court with ruling on dispositive motions.
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