Debt settlement companies help debtors settle their debts by negotiating with creditors on the debtor's behalf. In Texas, debt settlement companies must be careful not to mislead or misinform debtors. In addition, the companies must inform consumers of all their rights prior to entering debt settlement. Texas has strong consumer protection laws in place to protect debtors from unfair debt collection practices, as well as from shady debt settlement tactics.
Prohibition Against Misleading Services
Debt settlement companies in Texas may not mislead customers as to the services they provide or about the customers' rights under current debt settlement laws. For example, debt settlement services must not claim to be able to resolve debt problems instantly or make false or misleading claims about what debtors must do if they file for bankruptcy. For example, debt settlement companies may not claim that debtors will lose all their property in a Chapter 7 bankruptcy, as this statement omits the property exemptions built into Chapter 7 bankruptcy.
Cease-And-Desist Law
At the time of publication, Texas prohibits both debt collectors and the original creditor from contacting a debtor if the debtor sends a written demand that the debt collector cease contacting him. Debt collectors and original creditors may still contact the debtor to inform her of an impending lawsuit against her after the debtor makes this request. The debtor may request that persons involved with the debt stop contacting her at work or stop contacting her altogether.
Statute of Limitations
Texas has a statute of limitations of four years on all consumer debts. The statutes of limitations begins when a debtor defaults on the debt, not when the debtor takes out the loan. For example, if a debtor defaults on a credit card debt one year after using the card, his creditor has four years from that point to sue him in civil court for the amount of the debt. Creditors may still contact debtors by phone after the statute of limitations expires as long as they don't threaten to take the debtor to court, as they cannot use the legal system to collect a debt after the statute of limitations expires.
Prohibition of Wage Garnishment
Texas does not allow creditors to garnish debtors' wages to satisfy most unpaid obligations. Creditors can garnish bank accounts or non-earned income, such as royalties or rent after winning a lawsuit against a debtor, and creditors may garnish wages if the debtor owes child support. If a creditor illegally garnishes a debtor's wages, the creditor may face a misdemeanor charge or incur fines.
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