Credit card charge off : Can creditor take away the electrician's toolbox and the car even if the car was paid off a long time ago?

Question

Here is the situation:

1. Suppose a person owes a credit card company $10,000, can't pay it any longer, and after 6 months, the credit card company decides to charge off this credit card.

2. Suppose that person has a car that was paid off a long time ago. The car is not related to the credit card at all. The person has never used the credit card to pay for the car in any way. The value of the car is now about $5,000.

3. Suppose that person is an electrician, and has a professional electrician toolbox used for his job. Suppose that he also paid off the toolbox along time ago, and did not even use that credit card to pay for the toolbox at all.

4. Location: Texas, USA.

5. After the charge off happens, suppose the creditor (debt collection agency) can successfully obtain a court-order to put a lien on the car, and even put a lien on his electrician toolbox.

Question:

(A) In this case, can the debt collection agency also take away the car ?
Or is it true that the creditor can put the lien on the car, but can't take away the car ?

(B) Similarly, can the creditor take away his professional electrician toolbox, which he uses for his job ?

Answer 1

They would have to get a judgement (from a lawsuit) before they could attempt any of that. In Texas a judgement lien can be attached only to real estate.

So it looks like the answer is generally no, but they COULD put a lien on your house or land.

Source: Judgement Liens on property in Texas (Nolo.com)

Answer 2

A creditor can sue you in court for payment, and if the court makes the judgement in their favour then the creditor can seize any assets you have to pay off the debt.

However some of the things you own are "exempt assets" and cannot be seized. These are things you need to live and to earn money. This normally includes:

• A place to live
• A means of transport
• A means to earn a living, usually called "the tools of your trade".

So under normal circumstances creditors cannot take your car if it is the only one you have, and the electricians toolbox would be off limits. If you had a second car, or a second toolbox, that would not be the case.

If you have a loan secured on your house (like a mortgage or home equity loan) or your car they can be taken if you default.

Answer 3

I wouldn't file bankruptcy. "Simply not having the money" is an airtight defense against collection actions -- you don't need bankruptcy unless you have certain edge conditions (like OJ Simpson who placed all capital in a Florida house).

First, "I can't pay it any longer" is no longer true. It used to mean "the interest is piling on faster than I can pay it" but usually, once it's charged off, interest stops and all payments reduce principal. If you can afford $1, you can afford to pay on it.

Credit cards are unsecured debt, unlike a car loan. The car loan attaches the car. Credit card debt attaches nothing - not even stuff you bought with the card!

The only way they could attach any asset is to a) sue you for the debt, and win; and a second legal action to try to identify and seize assets. If you put up a fight, this can cost them well over $10,000, so it's not super likely that they'd do it. As JohnFX says, they can't really attach non-real-estate assets in Texas.

As DJClayworth discusses, courts won't seize the tools of a person's trade, all parties will get far more money letting you ply your trade.

The best asset defense is to not have any take-able assets, and making them aware of that. They don't want to throw good money after bad in a collection action that won't bear fruit.

Now, bankruptcy actually is the court attaching all your assets. In Texas, you can protect IRAs, health aids, Bibles, and $50,000 of assets, including equity in your car and tools of trade. But bankruptcy damages your credit for nearly 11 years, so best avoided. Simply defaulting on a credit card or two does less damage - and no damage if you have a turn of fortune and can make a lump sum offer in exchange for removing adverse credit marks.