Credit Card Lawsuits and The "Suit on a Sworn Account" In Texas

In Texas, a “suit on a sworn account” is not a separate cause of action. It is a sort of “procedural device” allowed under Texas Rule of Civil Procedure 185. It is used in certain types of breach of contract actions that involved the plaintiff furnishing goods or services to the defendant. The principle advantage of a “suit on a sworn account” is that it allows the plaintiff to establish a “prima facie” right of recovery on its sworn petition if the defendant does not file a sworn denial. A defendant’s filing a “general denial” will not be enough for him to survive the plaintiff’s motion for summary judgment in a suit on a sworn account. In other words, the defendant will loose the suit on a sworn account without ever getting his jury trial. (For this reason, I currently suspect that a suit on a sworn account may violate Article I, Section 15 of the Texas State Constitution, which says: “The right of trial by jury shall remain inviolate…”. However, I haven’t researched the case law to see if this issue has been raised, so I am uncertain. It would also require looking into the historical basis of the suit on a sworn account, and the history behind Article I, Section 15.)

The constitutionality of the suit on a sworn account notwithstanding, it is clear that such a suit must be regarding a breach of contract involving the furnishing of goods or services. A plaintiff who merely loaned money to the defendant so that the defendant could buy goods or services from a third party cannot properly file a suit on a sworn account. Such a plaintiff must file an ordinary breach of contract, or other, action, and the burden is on the plaintiff to prove the breach of a contract.

The reason it is important to understand something about the suit on a sworn account is because credit card companies and third-party debt collectors in Texas, who are suing on a credit card debt, frequently try to file a “suit on a sworn account” on a credit card debt, despite the fact that it is often improper to do so. (The main exception would be if the credit card were some sort of store credit card, which might fall under the auspices of TRCP 185.) The motive for doing so is easy to see: it would place the burden on you to prove that you didn’t owe the debt. However, since credit card companies do not normally furnish you with “goods or services” (they merely loan you money to buy those goods and services from a third party), it is usually improper for them to file a “suit on a sworn account”. I regard it as unethical and illegal, and if I were a judge, I would sanction credit card company lawyers that deliberately broke the law like this, but I’m not a judge. So, you will have to make sure that you don’t let the credit card company lawyer in your case get away with it.

Chapter 7 Bankruptcy -Dallas, Texas

Chapter 7 Bankruptcy is titled “Liquidation”. Basically when you file for Chapter 7 Bankruptcy, your assets (at least “in theory”) are turned over to a bankruptcy trustee who then distributes them out to your creditors. In exchange for this, you get a discharge on certain debts, which means you are no longer under a legal obligation to pay those debts. If this was all that is understood about Chapter 7 Bankruptcy, you might think that it doesn’t sound like a very good option. (After all, if you have to give up your assets, such as your house, in order to get the discharge, then what is the advantage?) The law allows you to keep some of your assets when you file for Chapter 7 Bankruptcy. (Which assets you get to keep largely depends on what state you live in. I will assume here that we are talking about Chapter 7 Bankruptcy in Texas, because that is where I live.) The reason I say that you must give up your assets “in theory” when in Chapter 7 Bankruptcy is because a significant number of people will find that almost all of their assets are “exempt” under Texas law, so they will get to keep them by claiming state exemptions. (See Schedule C – “Property Claimed as Exempt”, and 11USC Section 522(b)(3), and Texas Property Code, especially Texas Property Code Sec. 41.001, 42.001, 42.002, and 42.0021.) For instance, many people in Texas will find that their house is homesteaded and that they can keep it in Chapter 7 Bankruptcy, assuming that they are still current on any mortgage or other debts secured by the house, but beware that recent changes in the Bankruptcy law have capped this exemption for some people recently moving to the state. (See 11 USC Section 522(p).) If you don’t own your home, you also might be better off claiming the Federal exemptions found in the Bankruptcy code. (See 11 USC Sec. 522(b)(2), 522(d)(1), and 522(d)(5) –Note that (d)(5), the “wildcard exemption”, would allow a renter to take a portion of the home ownership exemption found in (d)(1) to apply to any property that they own.) Whether to take the Federal or State exemptions, like everything, depends on your situation.

The basic bankruptcy process will work like this: (This is just a general outline, and you should consult with a lawyer for details.) First, you will need to take a credit counseling class, which should be available online from several sources . (See 11 USC Sec. 109(h) You will receive a certificate, which must be filed at the bankruptcy court. (Note that you must also take another “financial education class”, prior to receiving your discharge in Bankruptcy.)

After you get your certificate from the credit counseling class, you prepare the petition, schedules, and associated forms and file them with the proper bankruptcy court. File the credit counseling certificate with the court as well. The proper court to file in depends on where you live. In the Dallas area, this will probably either be the Northern District of Texas Bankruptcy Court or the Eastern District of Texas Bankruptcy Court. Forms for the petition and schedules that you must file are available at either court’s web site. Fill out all of the required information for your particular situation on the petition, forms, and schedules and file it with the court. You must also prepare and file a creditor’s matrix, which lists all of your creditors and their addresses, so that they can receive notice of the bankruptcy filing. The format of the creditor’s matrix usually depends on the court you are in, so check the web site of the particular court your are filing in. (Also, lawyers use electronic filing over the Internet, so I am uncertain whether the courts even take paper filings anymore. Call the clerk and ask whether you must file in an electronic format, or look on the court’s web site for details on pro se filing if you are doing it yourself.)

After you have filed all of the proper documents with the court, you will receive a notice for the “meeting of creditors”. Attorneys sometimes call this the “341 meeting”, because it is required under Section 341 of the bankruptcy code. A date, time, and location should be on the notice. You need to appear at this meeting, and you will be asked questions by the trustee and by any creditors who choose to attend. (In the typical “consumer debtor” case, i.e., your unsecured debts are mostly credit card debts, the creditors probably won’t bother showing up.) (Note that if you are a creditor, and receive notice that someone who owes you money has filed for Bankruptcy, then you have the right to attend the 341 meeting of creditors and ask questions of the debtor. As a creditor, you have other rights, including the possibility of getting a portion of any non-exempt property that the trustee collects.) Prior to the meeting date, you should call the trustee whose name and number appears on the notice, say you are representing yourself, and ask what records you are required to bring or send to the trustee in advance. For instance, you are required to provide and/or file your Federal income tax return, for the most recent tax year, within a specified time prior to the meeting. (See 11 USC Sec. 521(e)(2)(A)(i).) You must also provide income records for the 60 days prior to filing (these are typically pay stubs). (See 11 USC Sec. 521(a)(1)(B)(iv).)

After filing the petition, you will want to take the second course that was mentioned earlier. This is called something like the “pre-discharge financial management course”, and should also be available online. (See 11 USC Section 727(a)(11).) This certificate of completion also needs to be filed with the court. (Don’t assume that this is all that you have to do. You should consult 11 USC Section 521 regarding all of your duties as a debtor –as well as the rest of the bankruptcy code-, and make sure that you comply with all of them.)

Assuming that all goes well, then you would receive an order of discharge, which means you are no longer under a legal obligation to pay certain debts listed in the bankruptcy code, and other applicable law. (This typically will mean no further obligation to pay credit card debts.) Section 523 lists exceptions to discharge. These will probably come into play if things don’t go well for you. For the average consumer debtor, the most likely exception to discharge would be under Section 523(a)(2). This would include loans obtained by means of “fraud”. For instance, obtaining a loan with the intention of never paying it back, at the time that you get the loan, would likely be considered fraud, which would be an exception to discharge.

Before an exception to discharge of a debt will be found under Section 523(a)(2)(A), the creditor will have to prove this in an “adversary proceeding” in the bankruptcy court. The courts have defined the elements that the creditor must prove under 11 USC Section 523(a)(2)(A). In Texas these are: (1) that the debtor made a representation; (2) that the debtor knew the representation was false; (3) that the representation was made with the intent to deceive the creditor; (4) that the creditor actually and justifiably relied on the representation; and (5) that the creditor sustained a loss as a proximate result of its reliance. (See GE v. Guilford 406 F.3d 367, 372 (5th Cir. 2005).) (The attitude of most credit card companies and their lawyers sometimes seems to be that anybody who files for Chapter 7 acted fraudulently –this is probably because it is in their financial interest to use these exceptions to discharge as a means to eviscerate Chapter 7 Bankruptcy law through the court system. They will, of course, deny this.)

Such an adversary proceeding to determine dischargeability of a debt will be instituted by the creditor by filing a complaint alleging an exception to discharge under a specific statute, such as 11 USC Section 523(a)(2)(A). The adversary proceeding should be thought of as a separate lawsuit, to which you must file an answer and/or pre-answer filing, in accordance with the Federal Rules of Bankruptcy Procedure and the applicable Federal Rules of Civil Procedure. You must also engage in discovery, motion practice, and eventually have a trial regarding the matter. It will be time consuming, and you should familiarize yourself with all of the rules of procedure, and the local rules of the court. You will also need to familiarize yourself with the particular statute under which they are claiming an exception to discharge, and with the case law interpreting that statute. (Expect the creditor’s attorney to try to take advantage of the fact that you are not a lawyer.) Having a lawyer from the beginning is a good idea, but now you should really reconsider your decision to represent yourself, and retain a lawyer.

Texas Ex Parte Divorce

Just like any other lawsuit, a court must possess personal jurisdiction over the respondent in a divorce suit. The concept of “personal jurisdiction” is the right of a court to hear and determine a lawsuit involving a defendant by virtue of the defendant's having some contact with the place where the court is located. Every state generally has personal jurisdiction over persons within its territory. If the respondent is a Texas domiciliary and service of process is accomplished or the respondent accepts or waives service or otherwise enters an appearance, the court acquires personal jurisdiction. However, an “ex parte divorce” may be granted to a Texas domiciliary, even though the other spouse is a domiciliary of another state and is not amenable to process in Texas. “Ex parte” means a proceeding brought before a court by one party only, without notice to or challenge by the other side. In other words, the person seeking a divorce can file in a Texas District court without serving process or other notice on the person they are seeking a divorce from. Since the court does not have personal jurisdiction over the spouse, the court may only exercise “partial jurisdiction” over certain issues. The Texas District court has the jurisdiction to grant the divorce, but not to determine the managing conservatorship of children (child custody and support issues) or divide property outside the State of Texas. (The Texas District court may also lack jurisdiction to divide property within the state.) (See Dawson-Austin v. Austin, 968 S.W.2d 319 (Tex. 1998).)

The Holographic Will

A will is a legal means of disposing of your assets at death. If you do not have a will, then the legislature of the State of Texas has written laws of “intestate succession” that determine who gets your assets at death. Another way of looking at the issue is to think of the intestacy laws as the “default” means of disposing of a person’s assets at death, which he can vary by writing a will. One interesting feature of Texas law is the ability to write what is known as a “holographic will”, which will be honored by the courts if it is executed correctly. A holographic will must be written wholly in the handwriting of the testator and may be validly executed without the use of witnesses. (See Texas Probate Code Section 60.) In Texas, a signature by initials is sufficient to execute the instrument as a will if the will is otherwise “testamentary in character”, i.e., the writing shows the maker's desire to make a revocable disposition of his or her property to take effect after the maker's death, and the will need not be dated. (Cason v. Taylor, 51 S.W.3d 397 (Tex. App.-Waco 2001).) A holographic will that includes the signature somewhere in the instrument is sufficient to be regarded as a signature for a holographic will, even if it is not at the bottom or end of the holographic will. (In re Estate of Brown, 507 S.W.2d 801 (Tex. Civ. App. -Dallas 1974).)

These minimal criteria for a valid holographic will in Texas has led to the admission of some unusual documents as wills. In one case a greeting card that had the following writing on it was admitted as a holographic will: “Last Will: I leave everything to Verneice Daniels. BHD.” (Although it should be noted that the court in that case took into consideration the fact that the person who wrote the will was a practicing attorney –which tended to suggest that he knew what he was doing when he wrote it.) (Trim v. Daniels, 862 S.W.2d 8 (Tex. App.-Houston [1st Dist.]).) It is important to understand that it is possible for such an informally written document to be considered a valid will in Texas for at least two reasons. First, it is a cheap way of writing a will for yourself. Although hiring an attorney to write a formal, attested will, is preferable, this may not always possible in all circumstances, and the holographic will gives you a quick and easy means of disposing of your assets at death. The second reason to have some understanding of holographic wills is because if someone close to you dies, although they may not have written a formal, attested will, they may have written a holographic will which includes you as a beneficiary. Or, they may have written a formal, attested will that did not include you as a beneficiary, but then subsequently wrote a holographic will that revokes the prior will, and includes you as a beneficiary. It’s also possible to amend a prior, formally attested will with a “holographic codicil” in Texas. ( In re Estate of Brown, 507 S.W.2d 801 (Tex. App. –Dallas 1974) The holographic codicil might include you as a beneficiary. It is easy to imagine a situation where a person having considerable assets may have had a friend or lifelong companion that they intended to leave assets to at death, but they never got around to writing a formal, attested will. However, the now-deceased person may have written a letter or some other written instrument in their own handwriting that is signed and was intended to be a will, and, in fact, is testamentary in character. The point is: don’t just assume that because someone didn’t hire an attorney to prepare a formal will signed by two witnesses, that they didn’t write a will in Texas.

Driving While Intoxicated in Texas: The Request for ALR Hearing and Pre-Hearing Discovery

   In Texas, a person arrested for Driving While Intoxicated will normally have his driver’s license taken away from him by the arresting officer. This will normally happen because he either refused to provide a breath or blood specimen, or because he consented to give the specimen, and the test determined that he had a blood alcohol concentration of 0.08 or more. In place of his normal driver’s license, the arrested person will get a piece of paper (probably yellow in color) that will say “Notice of Suspension Temporary Driving Permit”. (DIC-25) This notice will tell him that his license will be suspended or denied effective 40 days after the date he received the DIC-25 (normally the day he was arrested). At the bottom of the DIC -25, it will tell him that he can request a hearing (known as an “Administrative License Revocation Hearing” –“ALR hearing”) to contest the suspension, and will give him an 800 number, a fax number, and a PO BOX address to send the request for hearing. (Currently, the fax number is 512-424-2650, but consult the DIC-25 or call DPS to make sure this information is still correct.) Normally, it is best to send a fax, then follow up with a phone call to make sure they got it. If you don’t have a fax machine, go to a Kinkos or a UPS store and have them send a fax, which will give you a successful transmission receipt to prove that you sent it. The bottom of the DIC-25 will also set forth what information needs to be included in the fax requesting the hearing. (This includes: Full name, date of birth, driver’s license number and state, current mailing address, home and daytime phone number, date and county of arrest, arresting agency, arresting officer, and whether test was failed or refused or not requested. If you want a live hearing, explicitly request it. You can also request a telephone hearing. (See Tex. Transp. Code § 524.034 and Tex. Transp. Code § 724.041). The request for hearing must be received by the Texas DPS no later than 15 days after receiving the notice (which normally means 15 days after being arrested for DUI). The request for a live ALR hearing might look something like this:

Texas Department of Public Safety, Driver Improvement Bureau

FAX: 512-424-2650

{date}

RE: Notice of Request for Live (in person) ALR Hearing

This is my notice of request for a live, in person, ALR hearing regarding the suspension of my driver’s license. Here is the relevant information:

Full Name: {put down your full name}

Date of Birth: {put down your date of birth}

Driver’s License Number and State: {put down your driver’s license number –see DIC-25}

Current Mailing Address: {put down your mailing address}

Home and daytime Telephone numbers: {put down your home and daytime telephone number}

Date of Arrest: {date of arrest –see DIC-25}

County of Arrest: {put down county of arrest –see DIC-25}

Arresting Agency: {agency that arresting officer worked for –see DIC-25}

Arresting Officer: {officer’s name and badge number on DIC-25}

Test Failure or Refusal: {put down: “purported refusal” or “purported failure”}

{your signature}

   After sending the notice, DPS will mail you notice of the hearing date. The DIC-25 also says that if a hearing is requested, the temporary permit to drive will remain in effect until the administrative law judge makes a final decision in the case at the requested ALR hearing. (Keep in mind that the administrative license revocation process is a completely separate matter from the underlying criminal case for driving while intoxicated, which has its own procedures and hearings.)

   Most of what has been said so far can be understood simply by reading the DIC-25 carefully. Another fairly easy step that should normally be taken is to request pre-hearing discovery. The Texas Administrative Code sets forth the right to pre-hearing discovery. (See 1 Texas Admin. Code § 159.13. However, unlike the request for ALR hearing, which should be done as soon as possible after you are arrested, you should wait a little while before filing the request for pre-hearing discovery. 1 Texas Administrative Code § 159.13(1) says: “…The request for discovery may not be filed with the department sooner than the date of the request for hearing, and may not be filed sooner than five days from the date of the notice of suspension…” This means that since notice of suspension (the DIC-25) is normally received on the date of arrest, you must normally wait until 5 days after the date of arrest to request pre-hearing discovery. Furthermore, you must not send the notice of pre-hearing discovery before the DPS has received your notice of hearing. Where should the request for pre-hearing discovery be sent? 1 Texas Administrative Code § 159.13(1) also says: “…All requests for discovery must be in writing and shall be served upon the department as prescribed in 37 TAC § 17.16 …”. 37 Texas Administrative Code Sec. 17.16 currently says that the fax number is: (512) 424-7171, and that the fax should be “…to the attention of the Director of Hearings, ALR Program…”. The fax for pre-hearing discovery, in a “refusal” case, could look something like this, in some instances:

Director of Hearings,

ALR Program

PO BOX 15327

Austin, Texas 78761-5327

Fax No: 512-424-7171

ATTENTION: DIRECTOR OF HEARINGS, ALR PROGRAM

Re: Discovery Request for "Refusal" Hearing

{your driver’s license number}; {your full name}

{SOAH Docket No. – put “Unassigned” if you haven’t received a notice of ALR hearing date yet}

{date you send request}

I hereby request all of the following items to be furnished to me forthwith pursuant to 1 Tex. Admin. Code § 159.13(a), Tex. Gov't Code § 2001.091, and the Texas Open Records Act, Tex. Gov't Code § 552:

1) a copy of the form DIC-23;

2) a copy of the Form DIC-24;

3) a copy of the DIC-25; and

4) a copy of my driving record, if it is to be offered for enhancement purposes.

If there are copying charges associated with this request, please notify me promptly so that payment arrangements can be made.

Sincerely,

{your signature}

You probably already have a copy of the DIC-24 and DIC-25, but you should ask for them again. The DIC-23 is the peace officer's sworn report or probable cause affidavit. (See 37 Tex. Admin. Code § 17.4(1)(B).

Personal Jurisdiction and You

    I recently had to deal with an interesting legal issue. The relevant facts of the situation were these: a client was sued in a Federal District Court in another state. The client didn’t live in that state. The client didn’t do business in that state. The plaintiff had clearly chosen to sue in that state because they happened to be in that state, even though it seemed like the wrong court to me. What was wrong with where the plaintiff had chosen to file suit? The court in this other state lacked (among other things), personal jurisdiction over the defendant.

    Personal jurisdiction is the idea that a defendant must have a proper connection with the court in which he is sued before that court may enter an “in personam” judgment against him. An “in personam” judgment is the type of judgment that requires a defendant to pay money or to obey some sort of injunction issued by the court. An “in personam” judgment is normally contrasted with a judgment “in rem”, which is a judgment regarding some particular piece of property within the state where the court sits. An “in rem” judgment, in contrast to an “in personam” judgment doesn’t impose any legal obligations on the part of anybody to pay money or to obey an injunction, it simply disposes of the legal rights of individuals with regard to some specific piece of property in the state. If a court may lack personal jurisdiction over an individual, he should consider challenging that court’s legal power over him regarding that issue.

    Federal Rule of Civil Procedure 12 should be consulted when one desires to challenge personal jurisdiction in Federal Court. One important thing to note about this rule is the requirement that certain defenses be pled at or before one serves an answer. If the defendant fails to raise these defenses at the proper time, then he waives them. Personal jurisdiction is a defense that should normally be challenged, by means of a pre-answer motion, made before an answer is served in order to avoid any possibility of waiver.

    The case law concerning personal jurisdiction is complex, and often vague. When studying this area of law, one will hear buzzwords like “minimum contacts”, “due process”, and “International Shoe”. It is an example of when hiring someone who has experience in law is usually a good idea. It is also an example of why a defendant should hire a lawyer as soon as possible, since a motion challenging personal jurisdiction will normally need to be served on the opposing party within 20 days after the defendant was served with the summons and complaint. (It may seem like a long time, but 20 days goes by very fast when you’ve been sued.)

Good Personal Finance Article

I think that this article makes a lot of good points regarding personal finance and bankruptcy for those with a lot of unsecured debt.

Post-Judgment Collection In Texas

   Once a plaintiff wins a judgment in a court, he must turn to collecting on that judgment. You might be surprised to learn that in Texas, some judgment debtors (people who lost a lawsuit and now owe the Plaintiff money), with a significant amount of wealth, do not have any assets that the judgment creditor (the Plaintiff who won the lawsuit) can take.

   There are several methods a judgment creditor might use to attempt to collect on a judgment in Texas. One method is to file an abstract of judgment. This will create a lien on the judgment debtor’s (nonexempt) real property in the county where the abstract of judgment is recorded and indexed. (Tex. Prop. Code § 52.001) (Note that this will only work with regard to the judgment debtor’s nonexempt real property, and the Texas homestead exemption will make most people’s homes exempt from this –see below.) Another common form of collection on a debt in Texas is a writ of execution. (See Texas Rule of Civil Procedure 621) An execution is a process of the court from which it is issued. The clerk of the district or county court, or the justice of the peace, shall issue execution to collect on a judgment . The writ of execution orders a sheriff or constable to satisfy the judgment and costs out of the property of the judgment debtor, to the extent that any property is subject to execution by law. (Note that the sheriff can only take (levy) property that is not exempted under the Texas property code, and some people may not have any property that isn’t exempt –see below for more on this.)

   A number of judgment debtors may discover that they can keep most if not all of their property, despite the judgment debt they owe. Furthermore, it should also be noted that, with certain family law exceptions, wage garnishment is generally not available for most types of debts arising under state law in Texas (See Texas Constitution Art. XVI, Sec. 28) Under Texas law, certain property is generally exempt from the satisfaction of many types of unsecured judgment debts. The biggest exemption for most people is their homestead exemption. (See Tex. Prop. Code § 41.001 (2007).) This will usually protect the judgment debtor’s house from certain types of unsecured judgment debts, such as a judgment debt owed to a credit card company. Furthermore, the homestead claimant's proceeds of a sale of a homestead are not subject to seizure for a creditor's claim for six months after the date of sale. (See Tex. Prop. Code § 41.001(c) (2007).) The Texas Property Code also provides an exemption for certain types of personal property, up to a certain value, from many unsecured debts. (See Tex. Prop. Code § 42.001 (2007).) For instance, a single adult, who is not a member of a family, has an exemption for various types of personal property, up to $30,000 in value, such as: home furnishings, including family heirlooms; farming or ranching vehicles and implements; tools, equipment, books, and apparatus, including boats and motor vehicles used in a trade or profession; wearing apparel; jewelry not to exceed 25 percent of the aggregate limitation prescribed by Property Code Section 42.001(a); two firearms; athletic and sporting equipment, including bicycles; and a two-wheeled, three-wheeled, or four-wheeled motor vehicle for each member of a family or single adult who holds a driver's license or who does not hold a driver's license but who relies on another person to operate the vehicle for the benefit of the nonlicensed person. (See Tex. Prop. Code § 42.001 & Tex. Prop. Code § 42.002 (2007)) There is also an exemption under Texas law for many types of retirement plans. (See Tex. Prop. Code § 42.0021 (2007))