Foreclosure can be a financially devastating event -- it can ruin your credit for up to seven years and force you to find a new place to live. Losing your home to foreclosure can also prevent you from buying another home for two to five years, or even longer if the lender foreclosed if you abandoned the home. However, if you live in Texas, your mortgage lender typically cannot garnish your wages for expenses related to a foreclosure.
Wage Garnishment Exemption
Although federal law permits private creditors, including mortgage lenders, to garnish up to 25 percent of your earnings, it also allows states to provide greater exemptions than those provided by federal law. Texas is only one of four states, which also include South Carolina, North Carolina and Pennsylvania, which completely exempts wages from garnishment in most cases. Texas only permits garnishment in cases involving unpaid taxes and child support -- it does not lift the exemption for mortgage lenders.
Judgments from Other States
Your wages may not be protected from garnishment if a mortgage lender obtained a foreclosure judgment against you in another state that permits wage garnishment. A foreclosure judgment is typically for a deficiency, which is the amount you still owe after the creditor sells your home. If you foreclosed on a home in another state and the lender sued you for a deficiency, you may still be subject to wage garnishment if you subsequently relocate to Texas.
Redomestication
If you live in Texas but derive earnings from an employer in another state, your mortgage lender may obtain a judgment against you in Texas and then seek redomestication of the judgment to the state where your employer is located. If the mortgage creditor successfully redomesticates a foreclosure judgment, it may garnish your wages to recover the money you owe under the judgment.
Considerations
Although a mortgage lender's ability to execute wage garnishment in Texas is limited, a lender with a valid foreclosure judgment may use other strategies to collect from you. The judgment creditor may seize funds in your bank accounts to pay a deficiency under a foreclosure judgment. Subject to Texas exemptions, it may also seize and liquidate personal property to pay against the judgment balance.
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