Texas Charging Orders – Collection Devices Available Against Limited Partnerships

Texas Charging orders are an often overlooked collection device. A charging order is a postjudgment collection device, meaning you must have already obtained a judgment in the underlying lawsuit. Charging orders in Texas are discretionary, and the Court does not have to grant one. With a charging order, a creditor can reach a debtor’s interest in a limited partnership. It is basically a lien on the debtor’s partnership interest. Payment to the creditor is ordered out of the debtor’s interest in the partnership. However, the creditor can only receive distributions that the debtor would otherwise receive. For example, if the debtor is a partner in a limited partnership, the creditor can obtain a charging order ordering the partnership to pay any distributions to which the debtor is entitled in the future to the creditor in satisfaction of the Judgment. For judgments obtained prior to September 1, 2007, the Court may, at its discretion, appoint a receiver, foreclose on the interest, and order a sale of the interest. However, due to recent changes in the law, for Judgments obtained after September 1, 2007, the lien against the debtor’s interest is the exclusive remedy. Appointment of a receiver, foreclose on the interest, and ordering the sale of the interest are no longer available.

Note: A charging order in Texas is unavailable against partners of general partnerships but is available against members of limited liability companies.

Filing Time-Barred Lawsuits Violates the Fair Debt Collection Practices Act

Creditors must ensure that they are referring files to their attorneys before the limitations period for filing suit has run. Failure to do so may prevent the attorney from filing suit due to possible liability under the FDCPA. The FDCPA prohibits a debt collector from using any false, deceptive or misleading representation or means in connection with the collection of any debt. The purpose of the Act is to eliminate abusive debt collection practices, and courts view FDCPA claims with an unsophisticated debtor standard. Generally, when a lawsuit is filed beyond the limitations period, it is the Defendant’s burden to raise the affirmative defense that the claim is time-barred, that the Plaintiff waited too long to bring suit. However, in the collections arena, filing a time-barred lawsuit may be construed as a violation of the FDCPA. An Illinois court recently ruled that a debt-collector violates the FDCPA if he files a lawsuit and knew or reasonably should have known that it was time-barred. (Ramirez v. Palisades Collection L.L.C.) If a debt collector does file a time-barred lawsuit, to defend himself against accusation of an FDCPA violation, he must be able to show that it was a bona fide error that occurred even though procedures were in place to avoid such an error.