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You can’t lose your car for not paying your credit card bill

Richard M.  Alderman Interim Dean of the Law Center

Richard M. Alderman
Interim Dean of the Law Center

Q. A debt collector for a credit card company has threatened to sue me. He told me if I didn’t pay he would sue and take my car. This will leave me without a way to get to work. Then I will not be able to pay any of my bills. Is there anything I can do to protect my car?
A. You do not have to do anything. The debt collector for the credit card company has no legal right to take your car. As I have said before, under Texas law certain property is “exempt.” Even if a creditor sues and gets a judgment against you, he may not take “exempt property.” Included in the list of exempt property is your car. This means that the debt collector cannot take your car, even if he sues and wins.
The debt collector’s threats to take your car also probably violate state and federal debt collection laws. Under both statutes, it is unlawful for a debt collector to threaten to take action that the law prohibits. As far as I am concerned, threatening to take exempt property violates our debt collection laws. Check out my website at the end of the next question to learn more about our debt collection laws.
Q. I have not had this arise, but I am still curious. Can a store demand to see a photo ID when I pay with a credit card? Some places ask, and many do not.
A. Until recently, the only law that controlled whether a store could ask for a photo ID from a customer was the contract between the credit card issuer and the merchant. For most credit cards, this contract prohibits asking for an ID if the card is signed. If the card is unsigned, the merchant has the right to demand to see a photo ID. Here is what each credit company contract says:
• Visa: Merchants cannot require ID if the credit card is signed. However, if the credit card is not signed, the merchant can ask you to show a government-issued ID and sign your credit card on the spot.
• Mastercard: Merchants cannot require ID if the credit card is signed. However, if the credit card is not signed, the merchant can ask you to show a government-issued ID and sign your credit card on the spot.
• American Express: Merchants should verify that the customer is the actual cardholder, but there are no specific requirements for (or against) requesting to see an ID.
• Discover: Merchants can request an ID if they believe the credit card isn’t valid. For unsigned credit cards, the merchant can request two forms of identification, one of which must be a government-issued photo ID.
Recently, however, Texas enacted a law that allows merchants to ask for photo identification for credit and debit card purchases—and turn down transactions if a buyer won’t show it. The legal issue now is whether this law or the contract between the store and the credit card issuer controls. In my opinion, because the law says a merchant “may” decline a transaction without a photo ID, the contract between the merchant and the credit card company controls. We will all have to wait for the lawsuit that I know will be led after the law takes effect in 2018 to see if I am right.
Q. I am going to cash out an IRA to pay some bills and repair my home. There will be about $4,000 left after I pay my bills. If I put the money left in the bank, can my creditors seize it?
A. As you apparently know, in Texas an IRA is “exempt” property. This means that even if you are sued, your creditors may not seize your IRA. Once you cash in the IRA, however, the funds generally lose their exempt status and may be subject to your creditors. This means that if you put the $4,000 in a bank account, it could be subject to a writ of garnishment.


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