When a Texas business is owed money by a company based in another state, collecting that debt can quickly become complicated. Jurisdictional issues, differing state laws and the logistics of out-of-state enforcement all make suing to collect a business debt across state lines more challenging than a local dispute.
With that said, unless a business that owes a debt is so underwater as to be rendered effectively collection-proof, it is often possible to pursue justice successfully. Whether that process can take place in Texas, and whether a judgment can be effectively collected once granted, are concerns that are unique to each set of relevant circumstances.
Seeking what is owed
The first step in suing an out-of-state business is determining whether a Texas court has jurisdiction over the debtor in question. This concern may be impacted by several factors, including whether the debtor has ever conducted business in Texas, signed a contract governed by Texas law or has sufficient contacts with the state. If a Texas court does have personal jurisdiction, a creditor can file suit locally and, if successful, obtain a judgment that may be enforceable in the debtor’s home state.
If jurisdiction in Texas is not an option, a creditor may need to sue in the debtor’s home state. This often requires hiring a Texas law firm experienced in coordinating multistate litigation. Filing in the debtor’s jurisdiction may be the most efficient way to secure a judgment and move forward with collection efforts, depending on the circumstances at hand.
Once a judgment is obtained, enforcement is the next hurdle. If the judgment is entered in Texas but the debtor’s assets are located in another state, the creditor must domesticate the judgment under that state’s laws—a process known as foreign judgment recognition. Most states, including Texas, follow the Uniform Enforcement of Foreign Judgments Act (UEFJA), which streamlines this process. After domestication, the creditor can use local enforcement tools such as garnishment, liens, or asset seizure to collect the debt.
Because interstate business debt collection involves complex procedural and jurisdictional rules, when circumstances like this arise, it is generally wise to seek personalized legal guidance and support as quickly as possible.