When the debtor dies…

Chasing a debtor into probate court.

Life as a Texas collections lawyer is rarely boring. Not every lawyer knows the best practice for collecting a judgment. No two situations are the same. Frequently we are retained by lawyers who obtain a judgment and then are stumped. A lawyer in Houston had obtained a judgment against a debtor who had a Big Firm lawyer representing him. Prosecuting judgments  in Texas is a specialty, not every one understand the process and eventually we were hired to collect the judgment.

The prior lawyer had been bullied by the Big Firm lawyer so we decided to level the playing field. First, we obtained a temporary restraining order prohibiting the debtor from moving his assets; something the previous lawyer couldn’t seem to stop. Then we began deposing the debtor’s business associates to get a clear picture of his dealings with others.

The debtor was married. He had a house in Houston where he stayed most of the time. His wife had one in Galveston, where she stayed most of the time.  Both of these homes were the stuff of dreams for your average American. And they were defrauding the local property tax authorities because each of them were claiming their residence as a homestead.

As we were working our way towards asking the court to execute on the house in Houston, the debtor died. So we filed a claim in the probate of his estate. The wife, who still lived in Galveston, now claimed the Houston house as her homestead. The Houston home was worth about $750,000 (which he owned free and clear), but the Galveston home was only about $350,000.

After a fair amount of wrangling we were finally able to set the matter for hearing in the probate court. But before we could hold the hearing the executor sold the house. We agreed to to allow the sale to go forward and the money from the sale of the house was held in escrow until our client’s claim against the money could be resolved.

On the eve of the hearing to decide how the debtor’s estate could spend the money from the sale of the house, we reached an agreement with the wife. She agreed to a distribution of about 80% of the proceeds to our client. Under these rather odd circumstances, it was an excellent resolution.

While it’s a successful conclusion for sure, it’s also an example of the fact that collecting judgments requires aggressive effort, creativity, expertise and also requires a long-term commitment.

 

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