We often get calls from people about collection issues on credit cards and other consumer debt.

These calls come from both the consumer, as well as business which are owed money.

Our firm does not handle consumer debt cases, which is what personal credit cards are. We only handle commercial collection matters, so if you do need legal assistance in the consumer area, you will need to find another law firm that can help you.  However, I might be able to give you a few general pointers, for both the consumer and for businesses that extend credit to consumers.

Consumer:  You have just been served with a law suit claiming that you owe money on a credit card.  What do you do?

If you DO NOT owe the debt, or if you have a reasonable defense as to why you do not owe the debt, then it is worth fighting the case.  For example, the credit card company is suing the wrong person.  You never had the credit card with them, so owe them nothing.  Maybe you paid the balance in full, or at least a portion of it, and you have the cancelled check as proof. If you do have a defense, then you should find an attorney to help you with it if you have been sued.

However, if you DO owe the money but just don’t have the funds to pay it, filing an Answer or making an appearance in the law suit may not be the best thing.  Sometimes doing nothing is the best thing.

Filing an answer to a lawsuit causes the credit card company’s attorney to have to prove their case, which if there is no real defense, does nothing but increase the amount of attorney’s fees.  If you do nothing after you are served with the law suit, then they may get a default judgment against you, but the attorney’s fees will be less than if you make them prove up their case.  Understand that doing nothing may be the best thing to do ONLY if you owe the money and have no defense that you can raise as to why it is not owed.

The fact that you don’t have the money to pay the debt, or you lost your job, or you have medical bills, etc., is a REASON why you can’t pay.  It is NOT a defense.  That just says why you can’t pay it now; not that you don’t owe it.

If you have some funds, it may be beneficial to call their attorney and see if you can settle the matter.  The credit card company is not required to work with your or to even try to settle.  However, if they take a judgment against you, collection against an individual in Texas is very difficult with our homestead laws and strong exempt property laws.  They may have a worthless judgment if all of your assets are protected or exempt.  If so, then it may be in their best interest to take what they can.  A judgment will hurt your credit, but chances are that if you can’t pay the bill, your probably don’t have the best credit either.  However, no one wants to be looking over their shoulder all the time looking to see if the judgment creditor or their attorney might have found an asset that they could attach and take to help pay the judgment.

If you do reach a settlement with their attorney, make sure that you get it in writing.  That is the only way that you can prove what was agreed to.  Make sure that you comply with what you have agreed to as well, since a day late or a dollar short and you have broken the agreement.

Business: You have extended credit to a consumer, perhaps by credit card, and they have not paid you.  What do you do?

Businesses should establish internal procedures to follow up on outstanding accounts receivable if they are past due by a certain number of days, such as 30 or 40 days.  The sooner you pursue outstanding receivables, the better your chances of collection.  Old or “stale” claims can be very difficult or impossible to collect.

You should try to contact the consumer to see if there is any reason why they have not paid the debt.  Are they dealing with a cash flow issue, or is there some dispute?  Perhaps the goods or services shipped were defective or never received.  Maybe the customer did not get what they ordered or were expecting.  This is the point where you can resolve most issues, and usually maintain a good relationship with the customer.  If there was a mistake or a problem, you have an opportunity to fix it.  If done promptly and courteously, this can be a great way of maintaining a loyal customer and building good will.

If your customer does not dispute the debt, then you should try to see if a payment plan can be worked out.  Often times customers faced with financial difficulty are embarrassed and will not contact the business to say they are having problems.  However, if you are respectful and let them know that you are willing to work with them, within reason, you can often reach an agreement to get the debt paid, and maintain a good client relationship.

However, sometime the customer will not respond to you or will not follow through with agreed payments.  Then what should you do?

If you are in the business of selling goods or services, and not in the business of debt collection, then the Texas and Federal Fair Debt Collection Practices Acts do not apply to you.  However, if you hire a collection agency to assist with collections, it does apply to the collection agency.  Since the collection agency is acting as your agent, anything that they do wrong in violation of collection laws is imputed to you.  In other words, your agent’s wrongful actions will be treated as if you did them yourself.  Be very careful to make sure that you are dealing with a reputable agency if you want to try to pursue collections through a collection agency.

One other drawback with using a collection agency is that if they are not able to collect on the debt, the claim is that much older or more stale and by this time the customer is probably tired of the calls and even more willing to ignore you and your debt.

As mentioned above, collection against an individual in Texas on consumer debt is very difficult given our state’s strong homestead and exempt property laws.  For this reason, it is very difficult to find an attorney that will handle consumer collections on a contingency fee basis, where you don’t pay any attorney’s fees, and the attorney only collects payment on what they recover.  So unless you have information to show that the consumer has non-exempt assets available to pay a judgment, you might need to pay an attorney straight time or consider handling the collection yourself.  In Texas, Small Claims Courts have jurisdiction of up to $10,000.  If your damages are less than that, you can bring suit yourself, without an attorney.  Corporation and LLCs are able to be represented through an officer or a member/manager, and do not need to hire an attorney.

As discussed above, collection in consumer cases is pretty difficult in Texas.  For that reason, if you are able to reach a settlement with a customer, if may be in your best interest to do so.  If you have concerns that they may not make agreed payments after suit is filed, you can usually ask the Court to put your case on hold to give the customer a chance to pay.  That way, you are not dismissing the case until all the settlement payments have been made if the customer required a payout.  Make sure that all agreements are written so that everyone is clear on what has been agreed to.

If you have not been able to settle the case and have to take a judgment against a customer, make sure that you order an Abstract of Judgment and file it in the county where your customer lives or where you know they may own real property.  This will put a lien on all non-homestead real property in that county, if any, and will have to be paid off if they want to sell the property.  Judgments are good for 10 years, so if you want to keep the judgment “alive”, make sure that you talk with an attorney about what needs to be done before those 10 years are up and the judgment becomes dormant.

So what you do and how you handle the debt will depend upon whether you are the creditor or the debtor, whether you have any defense or not, how collectible any judgment might be, and how willing the other side is to cooperate with you to get the matter resolved.

For more information regarding debt collection on Consumer Debt and the Texas and Federal Fair Debt Collection Practices Act, or to file a claim through the Texas Attorney General’s Office, click: https://www.oag.state.tx.us/consumer/debt_collection.shtml.

f you believe that you may be the victim of Identity Theft and want to know what you should do, please take a look at this link to the Federal Trade Commission on what to do to recover from identity theft: http://www.ftc.gov/bcp/edu/microsites/idtheft//consumers/defend.html.

I hope that some of these pointers will help!

It is not a very fun discussion to have with your loved ones, but it is essential.  It is particularly important if you want to make sure things are done the way that you want them.  A checklist for your  “talk” should include:

• Last Will and Testament: (that you have one, and where to find it) – If you don’t have one, make one.  It is required in order to pass what is in your estate to the people that you want, with as little expense as possible.

• Medical Power of Attorney: (make sure that your Agents have a copy) – If you don’t have one, make one.  It is required in order to allow someone to make medical decisions for you when you can’t make them yourself, and usually avoids the need for an expensive Guardianship of your Person.

• Statutory Durable Power of Attorney for financial matters: (make sure that your Agents have a copy) – If you don’t have one, make one.  It is required in order to allow someone to handle your financial matters for you, and usually avoids the need for an expensive Guardianship of your Estate.

• Directive to Physicians, also known as a Living Will:  (if you have one, make sure they know where to find it) – This allows you to decide whether you do, or do not, want life support in the event that you have a terminal or irreversible condition.  Often times, spouses are comfortable making that decision for one another, but do you want your adult child or children to have to make that decision for you?  If not, you should prepare one, and discuss with loved ones what you would like in that situation.

• Disposition of Remains: (if you have one, make sure they know where to find it) – This allows you to choose if you want to be buried or cremated so that you do not need permission from a surviving spouse or children.

• Organ Donation: Just signing the back of your driver’s license is not enough.  If you are in that rare 1% situation where you are brain dead and your organs are intact, the hospital is legally obligated to ask your family about donating your organs.  Your license may not be available for family to look at.  Also, your family can override your wishes to donate when you sign the back of your license, so please have that discussion with them while you are healthy, so that they fully understand how you feel, one way or the other.

• Pre-Arranged Funeral Plans: (if you have one, make sure they know where to find it) – This is the contract with the funeral home, and usually requires that you provide the original, especially if it is an older funeral plan.  They usually will not provide a refund, so if you do not use the plan that has been paid for, it will be wasted.  This is also a very good way to make sure that your wishes are followed, and that your family will not feel pressured into doing more than you wanted.

If you need assistance with preparing your documents, please give us a call.  We can help.

If you back up your data by some type of external hard drive, tape drive, or mirror drive, and your backup is in the office with you, it will probably not do you much good if your office burns, floods, gets blown to bits, or someone comes in and steals your external hard drive, etc., when they take your other equipment. If you are only backing up one data set, then you might overwrite good data with data that has been infected by a computer virus.

Offsite data backup has become much more reasonably priced, and often will store multiple encrypted data sets going back several weeks, and also may store your data remotely at multiple locations.  Redundancy is helpful in case one of their offsite backup location burns, floods, or gets blown to bits, and it is always nice to go back to the last data set before you downloaded the computer virus.

It is well worth your while to make sure that you automatically backup your data, such as setting it to back up automatically every evening, so that you don’t forget to run your backup.

If your business data is important to you, take the time to make sure that your data is securely backed up offsite.

When is the last time that you backed up?

In that entity book, you should maintain the bylaws or company agreement, buy-sell agreements, shares or unit certificates, member ledger, and minutes of annual meetings.  We also recommend that you keep any documentation received from the Secretary of State’s Office, State Comptroller’s Office, or Internal Revenue Service (IRS) that relates to the entity.  That way, you are keeping all of the imported entity documents together in one place.

Since it is so important to maintain all of the proper entity documents in one location, it is pretty safe to assume that it is also very important to know where you are keeping the entity book.

When is the last time that you saw your entity book?

• Husband names wife as his beneficiary on his 401(k). Husband and wife divorce and the wife gives up any claim she has to the husband’s 401(k) in the divorce settlement.  Husband never gets around to updating his beneficiary designation on the 401(k).  Husband dies.  Who takes?  [The ex-wife!]

• Husband and wife divorce and husband then changes his beneficiary designation on his 401(k) to his adult children.  Husband marries wife 2, then dies a few years later.  Who takes?  [New wife 2!]

Why?  Federal law governs 401(k) plans, so under Employee Retirement Income Security Act, or Erisa, if you are married, your spouse is presumed to be your beneficiary, regardless of whom you have listed on your beneficiary designation form.  That means that if you are married, unless your spouse signs a waiver, or has consented to someone else being named as your beneficiary, they are presumed to be the beneficiary.

Under Erisa, if you are single, your beneficiary of your 401(k) on your death is presumed to be the person or persons named on your beneficiary designation form.  So if you have named a prior spouse (now ex-spouse) as a beneficiary on your 401(k), and don’t get around to updating your beneficiary designations, they may receive a nice windfall upon your death, even if they waived the right to the money in a divorce.

How do you get around those problems with 401(k)s?  Well, the most obvious thing would be to make sure that you properly update your beneficiary designations if you are single.  If you are married and do not wish to leave your 401(k) to your spouse, see if they will sign a waiver or execute the consent to name someone else as a beneficiary.

Alternatively, you might consider cashing out or rolling over your 401(k) into an IRA when you change jobs or retire.  State law controls IRAs; not federal law.  If you are married and live in a community property state, you may not be able to gift your spouse’s community property interest in the IRA to your named beneficiary without their consent, but you may gift your share of the community estate.  Also, with an IRA, if you later divorce, the law usually treats ex-spouses as if they have predeceased you, so your IRA will usually pass to your alternate beneficiaries or to your estate by default if no other beneficiaries are named.

That is why it is always important to review your beneficiary designations on your accounts at the same time as you periodically review your Will to see if everything is up to date.

I have several clients that are presently stationed overseas, but they keep a house within the state, and intend to return here.  Since they “intend to return” to the State of Texas, and have an address that they claim as their residence, even though they are currently living overseas, then Texas is the state of their residence.

We prefer to meet our clients in person, since that usually allows us to communicate more clearly with one another, and make sure that we understand exactly what they would like.  However, that is not always practical.

As discussed, some of our clients are overseas and unable to meet in person.  We also have clients that reside in small towns in Texas that really do not want other people in their town to know their business, which sometimes includes the attorneys working in that town.  We also have clients that are family or friends of other local clients that want to prepare their documents, but don’t know anyone where they live, and would like to use someone that their family or friends trust.  Some just live in rural areas where there are no attorneys, or because of a physical aliment are unable to come in to visit an attorney and are too far away for the attorney to visit.

When we are unable to meet our clients face to face, we can still communicate by telephone and email to help them prepare the documents that they need.  Meeting face to face is always preferred, but the client’s needs can be met using other forms of communication.

Click here to view the newsletter.

If you are forced to flee on short notice, what should you take with you?

In addition to the food and clothing and medicines that you and your family and pets might need, you should also bring the paperwork and things that will help you get your life back in order after the emergency ends.

What important papers do you have?  Unless you have your legal papers in a building that can’t burn down, flood, or get blown away (such as a bank vault), you should probably take your Wills, Medical Powers of Attorney, Statutory Durable Powers of Attorney (for financial matters), etc., with you.  If someone dies, or is injured or incapacitated due to the emergency, these documents will be essential.

You should also bring your insurance information, or at least copies of the policy summaries that include your account number, contact information for the company, and policy limit information.  That would include, but is not limited to, insurance information on your home, business, vehicles, health, disability, life, and long term care coverage. Contacting your insurance company as soon as possible will often move your claims along faster, and help you get your life back in order sooner.  We also recommend that you take pictures of your property to show the condition before and after the disaster or accident.  This can be very helpful in proving up the existence, condition and value of the item(s).

Are there personal or business electronics that are essential to keep in contact with the people that you need?  If you are able to, you should probably grab your lap top and cell phones (and chargers too) so that you have some means of communication with loved ones and friends, as well as insurance companies and business associates.  You may need to conduct on-line banking and bill pay if you will be evacuated for an extended period of time.

Often times in an emergency situation, internet and cellular service are not available.  You should plan on a location to meet if the family is separated, and a specific person or point of contact that everyone should try to reach to let folks know where and how you are.

If you store important information on your computer, such as personal records, business information, or personal photos, make sure that you have some type of remote offsite backup of that data.  Even if your computers are destroyed, your data will be safe and can be downloaded to a new computer.  This is essential if you use your computers for business.  The prices for offsite data backup have really come down, and it is cheap insurance for any emergency, even a hard drive crash!

You should make sure that you have a list of all family members’ prescription medications and the contact information for each of their doctors and pharmacies.  You will need this information if prescriptions are lost or need to be refilled during an evacuation.

Some emergency plans may be very detailed.  They may include escape routes, food or other personal packing lists, password information, etc.  Talk with your family to develop the plan that works best for you.

What is important is that you have an emergency plan, so that if an emergency happens, you have a place to start and your family members or business associates will all be on the same page.  It will help you deal with the emergency, and help you get your life back as best you can after the emergency ends.

Click here to view the newsletter.