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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 ?

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  • 18
    Supposing further that this person is a real person, I would also advise this person to comply to the best of their abilities, within reason, with the credit card company; i.e. try to negotiate an achievable payment plan to deal with the debt. It is very rarely profitable to be hostile, a proven compliant behaviour will go a long way in the case a court case results.
    – Stian
    Commented Dec 17, 2021 at 10:05
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    Is this a real situation or did you make it up?
    – Emil Vikström
    Commented Dec 17, 2021 at 14:20
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    @StianYttervik: If the creditor has already made illegal threats to do things they're not entitled to do, trying to comply/negotiate does not sound like a good idea. A better idea would be documenting all of their illegal methods and refusing to have further contact with them.
    – R.. GitHub STOP HELPING ICE
    Commented Dec 19, 2021 at 15:30
  • @R.. If you have debt to a crook it is even more reason to seek to get rid of it as orderly and soon as possible...
    – Stian
    Commented Dec 19, 2021 at 17:05
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    @StianYttervik: By lawyering up, not by paying them or letting them steal things from you.
    – R.. GitHub STOP HELPING ICE
    Commented Dec 19, 2021 at 18:39

3 Answers 3

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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)

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    Thanks for your great answer. From your link, it clearly says that "In Texas, a judgment lien can be attached to real estate only (such as a house or land)." This clearly means that creditors can't put any lien on the car and the electrician's tool box.
    – Job_September_2020
    Commented Dec 17, 2021 at 8:28
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    One exception to this might be a security agreement signed by the borrower that lists specific items which are to be used as security. While somewhat uncommon with most credit card agreements, I believe they are used in some cases.
    – jwh20
    Commented Dec 17, 2021 at 12:41
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    And more generally, state laws typically provide that a vehicle (with a limited value) and "tools of the trade" are exempt from execution levies.
    – Pete Becker
    Commented Dec 17, 2021 at 13:16
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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.

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  • In many non-US countries your bed is protected, but not your shirt. Hence the expression.
    – mckenzm
    Commented Dec 18, 2021 at 0:31
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    Nothing can force you into bankruptcy. You can rest on the concept that creditors can't get blood from a stone. Way too many people file bankruptcy as it is. Often they just do it because it seems less bad than listening to creditors blow up their phone everyday, but that's just unawareness of the options.
    – Harper - Reinstate Monica
    Commented Dec 18, 2021 at 17:30
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    @Harper-ReinstateMonica Any creditor to whom you owe more than ~ $16,750 can file an involuntary bankruptcy petition if they think you have assets but you simply think that no one can "force" you to pay. It almost never happens to individuals, but it's legally possible.
    – tbrookside
    Commented Dec 18, 2021 at 23:59
  • @DJClayworth, Thanks for a very good answer. I did not know that the financial law in Canada is very similar to that of the US.
    – Job_September_2020
    Commented Dec 19, 2021 at 7:49
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    @tbrookside, Would you please clarify if this "involuntary bankruptcy petition" applies to the US and to Texas in particular ? If possible, would you please share a link to a website so that everyone can get more info from it ?
    – Job_September_2020
    Commented Dec 19, 2021 at 7:53
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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.

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