Your wages can be garnished after repossession, but only if the car was sold or auctioned for less than the amount you owe on your loan, creating a deficiency balance. Even if you owe a balance to the lender, garnishment may be a last resort option.
Wage Garnishment: Only One Option
In order for a lender to garnish your wages, they must get a court order following the laws of your state. Typically, a creditor can't just take your wages if you stop paying on a debt. They have to follow certain steps, the first of which is to sue you, and get a judgment from the court.
If the court grants a judgment to the creditor, garnishment of your wages is just one option they may have for collecting what you owe. Generally, there are three options creditors have for collecting debts after a judgment:
- Wage garnishment – This is an order to have your employer hold money out of your paycheck and give it to the creditor.
- Seizing funds – This is when a creditor takes money directly from your bank account(s).
- Seizure of property – A lender can get a judgment for seizure and sale of any valuable property you own in order to repay your debt.
If your lender is granted a deficiency judgment, it's up to you how to proceed from there, but you do have options.
If You Owe a Deficiency after Vehicle Repossession
According to the legal website Nolo.com, you have options for defending against a deficiency balance collection. These options include doing nothing until a lender actually starts collection action, using your state's exemptions to protect your property, negotiating a payment plan, and, as a last resort, filing bankruptcy.
Choosing to do nothing can be an advantage as long as the creditor doesn't start the collection process. Nolo.com also states that this can be beneficial if you have little to no income or assets – commonly known as being "judgment proof." However, your wages and assets need to be exempt.
You can use your state's exemptions in most states to keep a creditor from collecting on a debt you owe, as long as your wages and property are under a certain dollar amount. Exemptions and amounts vary by state, so be sure to research what can and can't be collected on where you live.
Even though a creditor sued you for a deficiency judgment, it doesn't mean they aren't willing to work out a repayment plan with you. Not all lenders are going to be open to this, but it's important to keep the lines of communication open between you and the lender. Additionally, knowing what you can do to get this taken care of is in your best interest – the repossession is already showing on your credit reports, and you don't want an additional poor payment history on top of that.
As a last resort, you could file for bankruptcy. A Chapter 7 bankruptcy is a relatively short process that results in the majority of your debts being wiped out once the bankruptcy is discharged. This is a serious step to take though, and it requires a lot of thought. Depending on the amount of your deficiency, the process of bankruptcy may be overkill (deficiency balances aren't typically that high).
The Best Defense against Repossession is a Good Offense
Truthfully, before you even need to consider the possibility of a creditor garnishing your wages after a repo, you should avoid repossession altogether. In some cases, this means simply communicating with your lender at the first sign of financial hardship. Often, lenders would rather work with borrowers than go through the hassle of having to repo a car.
When you communicate with the lender, it could result in a temporary lowering of your monthly payment, being able to move a payment to the end of the loan term, or even the opportunity to refinance your vehicle.
If You Need a Vehicle
If you need a car after repossession or during a bankruptcy, look no further than Auto Credit Express. We work with a national network of special finance dealers that have the lenders available to help people in many challenging credit situations. Don't wait any longer to get the vehicle you deserve – contact ACE, today! Simply fill out our easy auto loan request form, and we'll get the process started right now.