Can Your Wages Be Garnished After a Car Repossession?

If your vehicle is repossessed due to defaulting on your loan, you may still owe a remaining balance, known as a “deficiency balance.” This can happen if the lender is unable to recoup the full amount you owed on the loan after selling the repossessed vehicle. In such cases, the lender may attempt to collect the deficiency balance from you, and wage garnishment could be one of the methods they use.

Understanding Deficiency Balances

When a lender repossesses a vehicle, they will typically sell it to try to recoup the remaining balance on the loan. However, if the sale proceeds are not enough to cover the full amount you owed, you will be left with a deficiency balance. This means you still owe the lender the difference between what you owed and what they were able to recover from the sale.

Wage Garnishment After Repossession

If you have a deficiency balance after your vehicle is repossessed, the lender may take legal action to try to collect the remaining debt. This could include obtaining a court judgment against you, which would then allow them to garnish your wages. Wage garnishment is a legal process where a portion of your paycheck is withheld and sent directly to the creditor to pay off the debt.
However, wage garnishment is typically a last resort option for lenders. They may first try to work with you on a payment plan or negotiate a settlement before resorting to garnishment. Additionally, some states have laws that limit or restrict a lender’s ability to collect a deficiency balance, so your specific situation may vary.