A Texas Collections Firm for Lenders and Financial Institutions

If you are a workout officer, special assets officer, or in-house counsel at a bank, credit union, finance company, factor, equipment lessor, or specialty lender, your collections work looks nothing like a trade creditor’s. You are usually chasing secured debt. You have promissory notes, security agreements, UCC filings, and often a guaranty. You may have collateral that has been repossessed, foreclosed, sold at auction, or that the borrower is flatly refusing to surrender. Your problem is rarely “collect this invoice.” It is usually one of these:

• The borrower defaulted, the collateral was liquidated, and there is a deficiency balance to pursue
• The borrower defaulted and is refusing to surrender the collateral
• The principal obligor is in bankruptcy and you need to pursue the guarantors
• The borrower is challenging the commercial reasonableness of the disposition
• There is a § 51.003 fair-market-value offset dispute after a real-property foreclosure
• A judgment has been obtained and the borrower’s assets need to be located and reached

We handle all of the above. We have done commercial collections work in Texas since 1994, including the specific issues that come up when a financial institution moves a loan into recovery. Our lawyers have prosecuted note-and-guaranty suits, defended commercial reasonableness challenges, litigated § 51.003 offset disputes, and run full post-judgment enforcement against borrowers and guarantors across Texas and, through reciprocal enforcement, in other states.

This page is our overview for institutional lenders. The pages it links to take each issue further.

Deficiency Collection After Collateral Liquidation

For most lenders, the largest chunk of a recovery loss is the deficiency: the balance left after collateral has been repossessed, sold, and applied. Some deficiencies are small and not worth chasing. Many are not, especially on equipment finance, commercial vehicle, and inventory-secured loans, where the collateral depreciates faster than the principal pays down.

Mechanically, pursuing the deficiency is a lawsuit on the note and guaranty followed by full post-judgment enforcement. We do this work routinely. We file suit, prosecute to judgment (usually through summary judgment, which is the right vehicle for liquidated note debt), and then conduct post-judgment discovery, abstracts, garnishments, executions, turnover orders, and contempt where it takes that.

Two things set a deficiency suit apart from an ordinary trade-creditor matter. First, the defenses are different: failure of consideration, modification, fraud-in-the-inducement, and, most often, commercial unreasonableness in the disposition of the collateral. We have beaten each of these at summary judgment. Second, the documentation is different. Promissory notes, security agreements, UCC-1 filings, repossession records, auction or private-sale records, and notice-of-disposition records all come into play, and we are comfortable working with all of them.

[Link: Pursuing the Deficiency After Collateral Liquidation]

Promissory Note and Guaranty Enforcement

On paper, suit on a promissory note is a straightforward summary-judgment matter: the lender proves up the note, default, and balance, and the burden shifts to the borrower. In practice, borrowers and guarantors raise a familiar set of defenses, and winning on summary judgment takes affidavit and documentary work that anticipates and disposes of them.

We prosecute notes and guaranties as a regular part of our practice. Common matters include:

• Single-borrower commercial promissory notes with one or more guarantors
• Multiple-guarantor structures (joint-and-several pursuit)
• Modified or restructured notes where the borrower contests the modification’s effect on the guaranty
• Lines of credit and revolving notes where the borrower contests the balance computation
• Notes where the guarantor claims discharge through impairment of collateral or release of co-guarantors

[Link: Promissory Note and Guaranty Enforcement]

UCC Article 9 and Commercial Reasonableness Challenges

When a lender pursues a deficiency, the borrower’s most common defense, and often the only one, is that the collateral was disposed of in a commercially unreasonable manner under Texas Business & Commerce Code Chapter 9 (Article 9 of the UCC). If the borrower wins on commercial unreasonableness, the deficiency claim may be reduced or wiped out entirely under the rebuttable presumption rule.

We have prosecuted and defended this issue many times. The fact patterns repeat:

• Disputes over the adequacy of pre-disposition notice under § 9.611
• Disputes over the manner of sale (public auction vs. private sale, advertising, dealer-only auctions, location)
• Disputes over the timing of the sale and the condition in which the collateral was sold
• Disputes over the price obtained relative to wholesale or appraised value

Our approach is to build the commercial-reasonableness record at the front end, using affidavits from the lender’s recovery personnel, auction records, market comparables, and industry-practice evidence, and to use that record to win summary judgment on the deficiency before the borrower’s defense gains traction.

[Link: UCC Article 9 and Commercial Reasonableness]

Real Property Deficiencies and § 51.003 Fair-Market-Value Offset

Lenders holding real-property-secured debt run into a specific Texas statute when pursuing the deficiency after a non-judicial foreclosure: Texas Property Code § 51.003. Section 51.003 lets the borrower or guarantor seek a fair-market-value offset against the deficiency, separate from the foreclosure sale price. If the borrower shows the property was worth more than what the lender bid at the foreclosure sale, the deficiency drops accordingly.

Section 51.003 disputes are appraisal cases. They turn on competing appraisals of the property as of the date of the foreclosure sale. We have handled both sides of these disputes, for lenders pursuing deficiencies and against borrowers asserting offsets, and we work with appraisal professionals on both the prosecution and defense of these claims.

[Link: § 51.003 Fair-Market-Value Offset in Texas Real Estate Deficiency Suits]

Replevin and Sequestration: Recovering Collateral the Borrower Won’t Surrender

Sometimes the threshold problem is not the deficiency but recovering the collateral itself. The borrower has stopped paying, will not hand the collateral over, and is using or hiding it. Self-help repossession is not always available, and even when it is, it may not be practical, because the collateral is locked inside a building, behind a fence, or in another jurisdiction.

Texas gives secured creditors pre-judgment remedies for exactly this. Sequestration under Texas Civil Practice & Remedies Code Chapter 62 lets a secured creditor obtain a court order directing seizure of specific personal property pending litigation, when the statutory grounds are met. Replevin is the related common-law remedy. We handle these matters as an extension of our broader collection practice and fold the recovered collateral into the deficiency suit that follows.

[Link: Replevin and Sequestration to Recover Collateral]

Guarantor Defenses: Discharge, Release, and Impaired Collateral

Guarantors sued on their guaranties tend to raise one of a handful of defenses: that the guaranty was never properly executed, that consideration failed, that the guarantor was released, that the lender modified the underlying obligation without the guarantor’s consent, that the lender impaired the collateral, or that the lender’s failure to dispose of collateral commercially reasonably discharged the guarantor.

We have prevailed against each of these at summary judgment and at trial. Most modern guaranty forms include broad waivers that defeat these defenses on their face, but we regularly run into guaranties that lack waiver language or include carve-outs the guarantor tries to use to manufacture a defense. We have handled both.

[Link: Defeating Guarantor Defenses]

Working With Bank Counsel and Outside-Counsel Standards

Sophisticated lender clients have engagement standards: conflict checks, status reporting cadence, e-billing systems, audit-letter responses, matter management protocols, and confidentiality requirements. We are comfortable working under all of it. We have handled matters under bank engagement letters with detailed reporting and budgeting requirements, and we track matters in formats compatible with the common matter-management systems.

We also coordinate appropriately with in-house counsel. Many lender clients run the relationship through an in-house collections or workout counsel. Our job is to execute the legal work efficiently, communicate clearly, and stay in our lane, which is collections only.

[Link: Working With Bank Counsel and Lender Engagement Standards]

Coordinating With Bankruptcy Counsel

When a borrower or guarantor files bankruptcy, we coordinate with the lender’s bankruptcy counsel on:

• Proof-of-claim filing and amendment
• Stay-relief motions where the matter justifies them
• Non-dischargeability analysis under 11 U.S.C. § 523, particularly for fraud-related claims (§ 523(a)(2)), fiduciary defalcation (§ 523(a)(4)), and willful and malicious injury (§ 523(a)(6))
• Reaffirmation issues in consumer cases
• Continued state-court collection against non-bankrupt co-obligors and guarantors

We do not file bankruptcy work ourselves, but we know the touchpoints between state-court collection and bankruptcy proceedings well.

[Link: Coordinating With Bankruptcy Counsel]

Move a File Forward

If your institution has loans in workout, deficiency balances to pursue, guarantors to enforce against, or judgments that need to be made productive, get in touch. We respond to lender intake quickly and give matter-specific assessments before any work starts.

Contact us to get started or call 214-368-4686.

Related Pages

• Pursuing the Deficiency After Collateral Liquidation
• Promissory Note and Guaranty Enforcement
• UCC Article 9 and Commercial Reasonableness
• § 51.003 Fair-Market-Value Offset
• Replevin and Sequestration
• Defeating Guarantor Defenses
• Working With Bank Counsel
• Coordinating With Bankruptcy Counsel
• Collecting Judgments in Texas
• Enforcing Foreign Judgments
• Texas Collections Law FAQs