Commercial Debt Collection Laws in Texas: Complete 2026 Guide

If you’re a Texas business owed money, your legal rights are worth understanding before you decide what to do next. Texas law gives commercial creditors real tools — but most of them run on clocks, and some of the remedies people assume exist here don’t.

This guide covers what actually applies to collecting a business-to-business debt in Texas: the four-year deadline, interest when your contract is silent, the enforcement toolkit after a judgment, the lien clocks, and why B2B collection sits outside the consumer FDCPA.

One note on how to read it. Statutes get amended, jurisdictional limits and filing fees change, and how any rule lands depends on your facts. Where a number moves, we say so instead of pretending it doesn’t — confirm current figures with counsel or the clerk before you file anything.

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Quick reference: Texas commercial debt collection

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Statute of limitations: the deadline that ends the conversation

Texas statute of limitations for commercial debt: 4 years (Tex. Civ. Prac. & Rem. Code § 16.004).

What this means

You have four years from accrual to file suit to collect the debt. After that the debt becomes time-barred — it still exists, and a debtor can still choose to pay it, but your ability to enforce it in court is largely gone. Nothing about that deadline is negotiable, and no amount of diligent follow-up extends it.

When the clock starts

For most commercial debt, the claim accrues when the amount became due and unpaid — typically the invoice due date or the date of breach. Not the date you noticed. Not the date you escalated.

A hypothetical, to make the arithmetic concrete: an invoice dated January 1, 2022, on Net 30 terms, comes due February 1, 2022. The customer never pays. Absent something that changes accrual on those facts, the window to sue closes four years later.

Open accounts — an ongoing back-and-forth relationship with rolling invoices — are the case where creditors most often misjudge the date, because accrual can turn on when the parties’ dealings ceased rather than on any single invoice. If your file is an open account, don’t date the deadline yourself. Have counsel date it. For more on the four-year rule and the industry exceptions that run shorter, see our Texas commercial debt statute of limitations reference.

Can the deadline be extended?

Be careful here, because a lot of collection folklore lives in this question.

What generally matters is writing. Texas is restrictive about reviving a debt that is already time-barred, and whether a particular written acknowledgment or a partial payment affects the limitations calculation is technical and fact-specific — a question for counsel on your documents, not a rule to rely on in planning.

What clearly does not move the deadline: verbal promises, voicemails, and your own demand letters. Sending more of them doesn’t buy you time.

The practical takeaway: treat the original due date as your deadline, and act well before it. Recovery odds fall long before four years — assets move, businesses dissolve, principals scatter, and records go stale.

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Interest: what you can charge

Before judgment

If your contract or invoice terms state a rate, that agreement generally governs. This is the single cheapest thing you can fix in your paperwork, and it’s worth doing before the next job rather than after the next problem.

There is a limit to that freedom. Texas usury law sets ceilings, and they vary by transaction type and size — commercial transactions have more room than consumer ones, but “commercial” is not a blank check. Have counsel confirm the rate in your contract template.

If no rate was agreed, Texas allows legal interest at six percent a year, beginning on the 30th day after the date the amount is due (Tex. Fin. Code § 302.002). Note the 30-day delay — the statutory rate does not run from the due date itself.

After judgment

Once you have a judgment:

• If the claim rests on a contract stating an interest rate: the lesser of that rate or 18% a year (Tex. Fin. Code § 304.002)
• Otherwise: the Federal Reserve prime rate, with a 5% floor and a 15% ceiling (Tex. Fin. Code § 304.003) — so 5% is the minimum, not a flat rate
• Interest is calculated from the date of judgment until paid in full. Because prime moves, confirm the currently published rate rather than assuming last year’s.

Late fees

A late fee generally holds up when it is stated in your contract or invoice terms before the work begins, is reasonably related to what the delay actually costs you, and isn’t punitive. A fee invented after the invoice goes unpaid is a much weaker position than one the customer agreed to up front.

A common convention in commercial terms is 1.5% per month — the same rate the Texas prompt payment statute applies to overdue construction payments (Tex. Prop. Code § 28.004). Whatever structure you choose, put it in the terms, state it in plain language, and apply it consistently. Selective enforcement is what gets a fee argued about later.

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Legal remedies: how collection actually works in Texas

1. Demand letter

What it is: formal written notice demanding payment.

What it should contain: the amount owed, what it’s for, a clear and dated deadline, and what happens next. Keep it accurate and professional — an overstated letter is worse than no letter, because it hands the other side something to point at.

When to use it: first, always. Beyond the chance that it simply works, it establishes a record and a date.

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2. Justice court (smaller claims)

What it is: Texas justice courts handle smaller money claims on a simplified track, without the cost and pace of district-court litigation.

The limit: justice courts have a statutory jurisdictional cap on the amount in controversy, and the legislature has raised it over the years. Confirm the current limit before you decide where to file — this is exactly the number that stale online guides get wrong.

The process, in outline:

1. File suit in the appropriate justice court
2. Pay the filing fee (confirm the current fee with that court’s clerk — it varies by court and by what service you need)
3. Have the defendant served with citation
4. Attend the hearing
5. Judgment entered if you prevail

Upside: cheaper and faster than district court, with more relaxed procedure. How an entity may be represented in justice court is worth asking the clerk or counsel about before you file.

Downside — and it’s the one people underestimate: winning is not collecting. A judgment is a piece of paper until you enforce it.

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3. Civil lawsuit (county or district court)

What it is: conventional litigation, for claims above the justice court’s jurisdictional limit or that are too complex for the simplified track.

The process, in outline: counsel files the petition, the parties exchange evidence in discovery, the case moves toward mediation or trial, and a judgment is entered.

What to expect: substantially more time and cost than justice court — enough that on many files the right question is whether the likely recovery justifies it. Get an honest estimate from counsel for your specific facts before you commit.

The provision that changes this math: a contract clause awarding attorney fees to the prevailing party. If your agreements don’t have one, add it.

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4. Wage garnishment — not available in Texas

What it is: a court-ordered deduction from a debtor’s paycheck — a remedy Texas does not give ordinary creditors.

Texas law: current wages for personal services are exempt from garnishment (Tex. Prop. Code § 42.001(b)(1)). The narrow exceptions are court-ordered child support and spousal maintenance, plus federal obligations like IRS levies and federal student loans. A judgment on an unpaid commercial invoice does not reach a debtor’s paycheck.

What to do instead:

• If the debtor is a business, the exemption is irrelevant — a corporation or LLC has no “wages for personal services.” Its bank accounts are reachable through ordinary post-judgment garnishment (Tex. Civ. Prac. & Rem. Code Ch. 63).
• If the debtor is an individual (a personal guarantor or sole proprietor), the paycheck itself is protected, but funds generally lose that protected character once deposited into a bank account.

For the full enforcement toolkit, see how to collect a judgment in Texas.

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5. Bank account garnishment

What it is: reaching funds the debtor holds at a bank. In Texas this runs through a garnishment action against the bank (Tex. Civ. Prac. & Rem. Code Ch. 63), not a writ of execution — the bank, not the debtor, is the party served.

The sequence:

1. Obtain a valid, subsisting judgment
2. Identify where the debtor banks (this is what skip tracing and asset discovery are for)
3. Counsel files the garnishment action
4. The bank is served and must account for the funds it holds
5. Non-exempt funds are applied to the judgment

Limitations to plan around:

• You need to know the institution. Guessing wastes a filing.
• Against an individual debtor, certain deposited funds may be exempt. Against a business account, exemptions generally don’t apply.
• Debtors frequently move or close accounts after being garnished, so current information and timing matter more than volume of attempts.

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6. Property lien (abstract of judgment)

What it is: a recorded claim against the debtor’s real property.

The sequence:

1. Obtain a judgment
2. File an abstract of judgment with the county clerk
3. Once recorded and indexed, a lien attaches to the debtor’s non-exempt real property in that county

Effect:

• The debtor generally can’t sell or refinance clean without dealing with your judgment
• The lien runs 10 years from recording and ends early if the judgment goes dormant (Tex. Prop. Code § 52.006)
• Keep the judgment alive: it goes dormant without a writ of execution within 10 years of rendition, and can be revived within two years of dormancy (Tex. Civ. Prac. & Rem. Code §§ 34.001, 31.006)
• Forced sale is a separate, rarer proceeding

Best against: a debtor who owns property and says they can’t pay. It is county-by-county, so file where the property is.

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7. Mechanic’s lien (construction and suppliers)

What it is: a statutory lien for construction labor or materials (Tex. Prop. Code Ch. 53), available to contractors, subcontractors, material suppliers, and laborers.

The deadlines — and they are the whole ballgame:

Two things people get wrong. The months count from the month in which labor or materials were furnished, not from the invoice date — and they land on the 15th. And the foreclosure deadline used to be two years; H.B. 2237 shortened it effective January 1, 2022, and a great deal of guidance still online hasn’t caught up.

Miss a deadline and you lose the lien — but not the debt. A lien is security for the claim, not the claim itself, and the underlying contract obligation remains enforceable inside the four-year window. If a GC has stopped paying you, your Texas options go well beyond the lien.

Lien preparation, filing, and foreclosure are legal work handled by licensed attorneys.

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FDCPA: what it does and doesn’t govern

The Fair Debt Collection Practices Act is a consumer statute. It defines “debt” as an obligation of a consumer incurred for personal, family, or household purposes (15 U.S.C. § 1692a(5)). An unpaid invoice between two businesses is not that, so B2B collection generally falls outside the FDCPA — regardless of industry.

That matters for what rules apply. It does not mean anything goes. Deception, threats, and harassment create exposure under other law, they hand the debtor a counter-narrative, and they destroy the leverage you’re trying to build. Texas also requires a third-party debt collector to obtain and maintain a $10,000 surety bond (Tex. Fin. Code § 392.101) — a basic screen worth applying to any agency you consider.

Treat the following as the professional standard for commercial collection, not as a recitation of the consumer rulebook.

Reasonable and routine

• Contacting the debtor by phone, email, and mail, including at their place of business
• Sending demand letters
• Reporting the debt to business credit bureaus
• Engaging a collection agency
• Filing suit — through counsel
• Dealing with the debtor’s attorney, if they have one

Never

• Harassing, threatening, or abusing anyone
• Calling repeatedly with intent to annoy, or at unreasonable hours
• Obscene or abusive language
• Any threat of violence
• Falsely claiming to be an attorney or law enforcement
• Threatening arrest or jail for a debt
• Misstating what you’re owed, what you’ve filed, or what you can do next

Risky enough to think twice

• Contacting the debtor’s customers or employer. Occasionally legitimate for locating a business; often creates more problems than it solves.
• Detailed voicemails. Assume someone else will hear it.
• Social media contact. Public, permanent, and easy to characterize as harassment.
• Showing up unannounced. ASA does in-person work in Texas deliberately and professionally — done badly, it’s a liability, not leverage.

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Personal guarantees: the document that decides the outcome

Many commercial debts involve a personal guarantee, where an owner personally promises payment if the company doesn’t pay. Whether one exists often matters more than anything else in the file.

Without a guarantee: your recovery is limited to the business. If the business dissolves or has nothing left, that’s the ceiling.

With a guarantee: the owner is on the hook alongside the entity, and closing the company doesn’t end their obligation.

Enforcing one

1. Sue both the business and the guarantor
2. Obtain judgment against both
3. Pursue the guarantor’s non-exempt assets — bank garnishment (wages themselves are exempt in Texas), an abstract-of-judgment lien on non-exempt real property, seizure of non-exempt personal property

Two honest caveats. An individual guarantor has exemptions a company doesn’t, including a strong Texas homestead — so “personal assets” is not the same as “all assets.” And enforcement still requires a judgment first.

Worth checking early: guarantees are signed once, often years before the trouble, and frequently forgotten by the person who signed. Pull the original credit application and contract before you decide how strong your file is.

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When assets disappear: fraudulent transfers

The pattern: a debtor moves property, vehicles, or the operating business to a family member or a newly formed LLC while your claim is pending.

Texas law: transfers made to defraud creditors can be attacked under the Texas Uniform Fraudulent Transfer Act (Tex. Bus. & Com. Code Ch. 24). Broadly, the analysis looks at intent, whether the debtor received reasonably equivalent value, and the debtor’s solvency around the transfer — but the statute is more detailed than any summary, and the outcome is fact-driven.

Signs worth documenting:

• Property transferred to a spouse or relative for nominal consideration
• A new entity formed and the old one’s assets moved into it
• Equipment or vehicles sold well below market value
• Any transfer that happens right after a lawsuit is filed, or once one is clearly coming

What it takes: a separate lawsuit, brought by counsel, that can unwind the transfer so the property is reachable again. These cases are complex and evidence-hungry, which is why the documentation you keep now determines whether they’re viable later.

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Bankruptcy: what changes the moment it’s filed

If your debtor files bankruptcy, collection stops immediately.

• Automatic stay: collection activity must cease. Continuing anyway is its own problem.
• Proof of claim: you file a claim in the case to participate at all.
• Distribution: unsecured creditors are paid after secured and priority claims.
• Discharge: remaining debt may be wiped out.

Secured versus unsecured is the whole story. A perfected lien or security interest puts you in a materially different position than an ordinary invoice — which is an argument for taking security before an account goes bad.

What to do: read the notice you receive and calendar the bar date the court sets in that case. Deadlines vary by chapter and by case; do not assume a generic one. Then file the claim.

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Practical tips for Texas businesses

1. Act early

Collectability decays with age, and it does so faster than most creditors expect. Cash positions change, principals move on, the people who remember the job leave, records go stale, and the four-year clock keeps running the whole time. The strongest moment to pursue a debt is when it is clearly past due — not after the fourth broken promise.

2. Document everything

• Keep invoices, contracts, purchase orders, and credit applications together
• Save emails, texts, and call logs
• Note every collection attempt with a date
• Capture the debtor’s website and listings before they disappear

3. Know your deadlines

• Four-year statute of limitations on the debt
• Mechanic’s lien notice and filing deadlines, measured in months
• The bar date in any bankruptcy your debtor files

4. Fix your paperwork

• Include a personal guarantee for LLC and corporate customers
• State an interest rate and a late-fee structure
• Add a prevailing-party attorney fee provision
• Specify Texas courts and Texas law
• Take a security interest and file a UCC-1 where the goods justify it

5. Escalate on a trigger, not a feeling

Set a rule: when an account passes a defined age and your own follow-up has stopped producing responses, it goes out. Whether you draw that line at 60 days or 90 matters far less than having a line at all — accounts that age quietly in a drawer are the ones that don’t get collected.

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Texas-specific realities

Working in a creditor’s favor

• A strong post-judgment toolkit — bank garnishment (Ch. 63), abstracts of judgment (Tex. Prop. Code § 52.006), and writs of execution
• Turnover orders — Tex. Civ. Prac. & Rem. Code § 31.002 reaches non-exempt property including present and future rights to property, with a receiver available and the order enforceable by contempt
• Serious lien statutes — construction and mineral liens give unpaid contractors and service companies real leverage, if the deadlines are met
• Room to set your own commercial terms — rate, late fees, guarantees, and fee-shifting are largely yours to negotiate, within usury limits

Working against you

• A four-year clock that runs whether or not anyone is watching it
• No wage garnishment for ordinary debts (Tex. Prop. Code § 42.001(b)(1))
• A strong homestead exemption — forcing the sale of a primary residence is difficult in most cases
• Personal property exemptions: Texas exempts a homestead and certain categories of personal property from forced sale, subject to statutory limits (Tex. Prop. Code Ch. 42). Those exemptions belong to individuals. A corporation or LLC has none — which is why a business debtor’s equipment, inventory, vehicles, accounts, and receivables are generally reachable. Exemptions matter mainly when the target is a personal guarantor, and the specific categories and caps are a question for counsel on your facts.

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When to bring in a collection agency

Consider placing a Texas commercial account when:

• It has aged past your own follow-up process
• The debtor has stopped responding to you specifically
• You need skip tracing or asset discovery to find out what’s actually there
• You want professional in-person engagement in Texas
• The file may need legal action, and you want it evaluated before the deadlines close

What a Texas agency does:

• Pursue the debt directly through demand, negotiation, skip tracing, and asset discovery
• Refer matters to licensed collection attorneys who file suit and obtain judgments
• Support enforcement through counsel (bank garnishment, abstracts of judgment, writs of execution, turnover orders)
• Coordinate lien and fraudulent-transfer claims with counsel where the facts support them

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Alexander, Strauss & Associates: Texas commercial debt collection

We work Texas commercial accounts, and only commercial accounts:

• 25+ years of experience
• Litigation handled by licensed collection attorneys — we are an agency, not a law firm
• In-person engagement, Dallas-based with statewide service
• Mechanic’s lien coordination with collection counsel
• Judgment enforcement
• Skip tracing and asset discovery

We’ve recovered over $250 million for our clients.

Get a free case evaluation →

No obligation. No upfront cost. We only get paid when you get paid.

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Texas law rewards creditors who move while their options are still open. The deadlines don’t care how busy the quarter was.

Contact us today for a free case evaluation →

This article is general information for commercial creditors, not legal advice. Statutes are amended, jurisdictional limits and court fees change, and every remedy above turns on your specific facts — confirm current figures and deadlines with qualified counsel before acting.

General information for commercial creditors, not legal advice. Laws and deadlines change and depend on the facts — confirm specifics with qualified counsel.