A car on a loan stands next to a gavel

Can Your Wages be Garnished Through Repossession?

Milad Hassibi February 27, 2019


A creditor or lender has the legal right to garnish your wages post-repossession, but only if the repossessed car was sold at auction for less than what you owed the lender. Typically, garnishment is saved as a last resort effort by most creditors and lenders.

How Does Wage Garnishment Work?

In order to begin garnishing your wages, your creditor or lender must get a court order for garnishment. The steps to obtain this court order vary between state and state. In most cases, a creditor cannot simply begin wage garnishment.

A white piggy bank with a home flying in the back

There are certain steps and actions your lender must take in order to begin the garnishment of your wages.

First, a lender must take you to court by suing you. Once the court places a judgement in the favor of the creditor, wage garnishment may begin.

If the court and judge decide to rule in favor of the creditor, having your wages garnished is just one of many options a creditor can choose to pursue in an attempt to collect.

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There are usually three different ways a creditor can go about collecting on a debt:

  • Wage garnishment – When your employer must hold funds out of your paycheck to give to your creditors
  • Seizure of funds – The creditor can go ahead and take the funds directly out of your bank account
  • Property seizure – A lender can receive a judgement for the legal seizure and sale of any valued property you have to repay the debt

Deficiency after Repossession

If your car was repossessed and sold for less than the amount you owed, you are deficient. There are two options. Consumers can wait and do nothing until collection action is taken by the lender. This is beneficial for consumers who may have a limited income and are unable to make any payments whatsoever.

Consumers can also utilize their states exemptions to stop a creditor from calling about a past-due debt. However, consumers must earn below a specific dollar amount and hold property under a certain dollar amount. These exemptions vary by state.

It’s important to note however that creditors are usually always open top negotiation, especially with a repayment plan. Although many lenders will not be open to this idea, its important to keep a clear and clean line of communication between yourself and the lender.

It is also best to address the issue as early as possible, as more and more derogatory marks may be added onto your credit reports.

If you are unable to make the payment plans and are looking for a way to stop the collection efforts, you can file for bankruptcy. With Chapter 7 bankruptcy, the majority of your consumer debts will be discharged once the bankruptcy is approved by the court.

Final Note

Going through wage garnishment is a difficult ordeal for most. Thankfully, there are a few steps you can take to ensure that your wages never become garnished. If you are buried under a mountain of debt and are looking for a way out, CrediReady can help.

Our network of trusted and verified bankruptcy attorneys in your area are prepared to give you a FREE bankruptcy consultation. Fill out our free consultation inquiry form to speak with your free attorney today!



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