Help??!! Don't Want To Appear To Commit Fraud

[mbrad1022]

I had a significant drop in income and had to make the tough decision to let some creditors go without payment. My intentions were to pay off the debts I could afford and then make arrangements or settle on the outstanding debts once my income increased.
I've been making payments and at times using two of my credit cards but paid off 5 other debts.
Now I'm getting notifications that I'm being sued by 3 of the creditors I let go.
Of course I cant afford to have any type of wage garnishment should a judgement be entered against me in those cases.
Since I have recently used my other credit cards I don't want it to seem like I'm committing fraud by filing chapter 7
Is filing a chapter 13 the best option?

 

[quincy]

What is the name of your state?

 

[mbrad1022]

Sorry, Texas

 

[Taxing Matters]

Of course I cant afford to have any type of wage garnishment should a judgement be entered against me in those cases.

You are in luck in that Texas is one of the few states in which wage garnishment is prohibited for private judgments. While Texas courts will enforce a court order issued from another state for wage garnishment, if your employer is in Texas and the creditors are suing you in Texas you should not have any problems with wage garnishment should they get a judgment against you. Of course, they can still hit your bank accounts or other non exempt assets once they get a judgment.

As for using the credit cards to pay other bills, you are generally not at risk for fraud charges if you truly intended to repay the debts you incurred. So the details of what you did matter. It is not unusual for people with debt problems to juggle their creditors a bit while they try to find a solution to pay everything. If you have reached the point where you realize the juggling act won't work out to hold you afloat until you get a better job or whatever to increase your income and are considering bankruptcy, then you need to stop using the cards to pay the other creditors and stop using them to accumulate new debt. Consult a bankruptcy attorney ASAP for advice on what to do from here, including what bills to pay and what you should let go at this point. After all, once you decide on bankruptcy, there is no point throwing more money to debts that will just get discharged anyway.

Good luck!

 

[mbrad1022]

Thank you, I really appreciate your response!

 

[Litigator22]

You are in luck in that Texas is one of the few states in which wage garnishment is prohibited for private judgments. While Texas courts will enforce a court order issued from another state for wage garnishment, if your employer is in Texas and the creditors are suing you in Texas you should not have any problems with wage garnishment should they get a judgment against you. Of course, they can still hit your bank accounts or other non exempt assets once they get a judgment.

As for using the credit cards to pay other bills, you are generally not at risk for fraud charges if you truly intended to repay the debts you incurred. So the details of what you did matter. It is not unusual for people with debt problems to juggle their creditors a bit while they try to find a solution to pay everything. If you have reached the point where you realize the juggling act won't work out to hold you afloat until you get a better job or whatever to increase your income and are considering bankruptcy, then you need to stop using the cards to pay the other creditors and stop using them to accumulate new debt. Consult a bankruptcy attorney ASAP for advice on what to do from here, including what bills to pay and what you should let go at this point. After all, once you decide on bankruptcy, there is no point throwing more money to debts that will just get discharged anyway.

Good luck!

Could you please clarify you statement that "Texas courts will enforce a court order issued from another state for wage garnishment"?

 

[PayrollHRGuy]

From Garnishmentlaw,org.

Garnishment Still Available Against Some Texas Debtors

Some Texas residents move to Texas after incurring debt in another state. These debts may not be protected from wage garnishment by Texas law. These out-of-state creditors may be able to attach wages by enforcing judgments from other states, using the laws of another state and not invoking Texas garnishment law.

Also, one strategy Texas creditors use is to determine if your employer has its home office or resides in another state that allows wage garnishment. The Texas law only applies to creditors residing in Texas. If you employer resides outside Texas, then the creditor can apply for a garnishment order in that state. Texas law will not protect you there.

 

[Taxing Matters]

Could you please clarify you statement that "Texas courts will enforce a court order issued from another state for wage garnishment"?

Perhaps I should have said that a Texas court will confirm (and thus not block) the enforcement of an order to garnish the wages of a Texas resident that is issued by a court of another state. As a result it is possible in some circumstances that a Texas resident will find his/her wages garnished for a judgment rendered in another state even though the Texas Constitution prohibits wage garnishment. As explained by in a relatively recent decision of a Texas appeals court:

The confirmation of an order from a foreign court may result in the garnishment of a Texas resident's wages even though a Texas court would be limited or precluded from issuing the same substantive order against a Texas resident. See Knighton, 856 S .W.2d at 20910; Tex. Const. art. 16, § 28; see also Texaco, Inc. v. LeFevre, 610 S.W.2d 173, 176 (Tex.Civ.App.Houston [1st Dist.] 1980, no writ). As the court noted in Knighton, this “is not a case wherein a party is seeking a Texas court order garnishing wages for the enforcement of a valid foreign judgment. That situation is clearly a different matter because Texas courts would then be asked to do an act which violates our Constitution.” Knighton, 856 S.W.2d at 210. Here, Maria did not request that a Texas court enforce the order; rather, she asked only that Texas give full faith and credit to the order. Because Texas courts need do nothing to enforce the valid Nevada order, we cannot conclude the trial court erred by confirming it. See id. at 207 (holding that Texas courts should not interfere when “no action has been requested to enforce the valid judgment of a sister state,” even when the judgment contained “an income deduction order.”) We overrule Patrick's first issue.​

Daus v. Daus, No. 05-13-00060-CV, 2014 WL 2109379, at *3 (Tex. App. May 14, 2014).

 

[Litigator22]

Perhaps I should have said that a Texas court will confirm (and thus not block) the enforcement of an order to garnish the wages of a Texas resident that is issued by a court of another state. As a result it is possible in some circumstances that a Texas resident will find his/her wages garnished for a judgment rendered in another state even though the Texas Constitution prohibits wage garnishment. As explained by in a relatively recent decision of a Texas appeals court:

The confirmation of an order from a foreign court may result in the garnishment of a Texas resident's wages even though a Texas court would be limited or precluded from issuing the same substantive order against a Texas resident. See Knighton, 856 S .W.2d at 20910; Tex. Const. art. 16, § 28; see also Texaco, Inc. v. LeFevre, 610 S.W.2d 173, 176 (Tex.Civ.App.Houston [1st Dist.] 1980, no writ). As the court noted in Knighton, this “is not a case wherein a party is seeking a Texas court order garnishing wages for the enforcement of a valid foreign judgment. That situation is clearly a different matter because Texas courts would then be asked to do an act which violates our Constitution.” Knighton, 856 S.W.2d at 210. Here, Maria did not request that a Texas court enforce the order; rather, she asked only that Texas give full faith and credit to the order. Because Texas courts need do nothing to enforce the valid Nevada order, we cannot conclude the trial court erred by confirming it. See id. at 207 (holding that Texas courts should not interfere when “no action has been requested to enforce the valid judgment of a sister state,” even when the judgment contained “an income deduction order.”) We overrule Patrick's first issue.​

Daus v. Daus, No. 05-13-00060-CV, 2014 WL 2109379, at *3 (Tex. App. May 14, 2014).

Thank you for the citations, but it seems to me that the issue is completely resolved with the U. S. Supreme Court ruling that the Full Faith and Credit Clause requires that a valid judgment or final order from one state is entitled to be enforced in other states regardless of the laws of the laws or public policy of the other states. * And that it is frivolous dicta on the part of the Texas court in Daus v. Daus to find a substantive distinction between:

(1) Being asked to enforce the Nevada order by wage garnishment in direct violation of the state constitution (which it avows it cannot do); and

(2) Being asked to lend full faith and credit to the Nevada order for wage assignment with the result that the constitutional prohibition is equally violated (which it says it can do).


[*]Underwriters Nat’l Assurance Co. v. N. Carolina Life & Accident & Health Ins. Guar. Ass’n, 455 US 691

 

[Taxing Matters]

Thank you for the citations, but it seems to me that the issue is completely resolved with the U. S. Supreme Court ruling that the Full Faith and Credit Clause requires that a valid judgment or final order from one state is entitled to be enforced in other states regardless of the laws of the laws or public policy of the other states.

If you already knew the basis for my statement, why the heck did you bother to ask me to clarify my earlier post? You are not, after all, questioning the fact that despite the Texas Constitution's prohibition of wage garnishments a wage garnishment order from the court of another state may indeed attach the wages of a Texas resident. Or did you really not know but after digging to confirm what I said came up with the U.S. Supreme Court decision on full faith and credit just to one up the Texas court?

* And that it is frivolous dicta on the part of the Texas court in Daus v. Daus to find a substantive distinction between:

(1) Being asked to enforce the Nevada order by wage garnishment in direct violation of the state constitution (which it avows it cannot do); and

(2) Being asked to lend full faith and credit to the Nevada order for wage assignment with the result that the constitutional prohibition is equally violated (which it says it can do).


[*]Underwriters Nat’l Assurance Co. v. N. Carolina Life & Accident & Health Ins. Guar. Ass’n, 455 US 691

I don't disagree with that, but that sort of thing by a court is not unusual. Sure, the court could have simply said that the U.S. Constitution requires doing that despite state law, but the court achieved essentially the same outcome with a nod to at least paying some respect to the state constitution. I didn't opine on the soundness of the logic underpinning the Texas court's decision; I simply stated what the effect of it was.