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What Happens to Wages After Repossession Repercussions post-repossession involving car loan default can even mean wage garnishment. This can happen if the car is sold for less than what was still owed on it, creating a deficiency balance that remains due from the borrower. Let’s take a look at the situation and what this means.
When can you Garnish Wages?
Deficiency Balance – If that recent college grad took out an auto loan to have the money for their new car, no one could afford and then they get it repossessed- you’ll be responsible for picking up the tab on what was left on due before repo. This procedure requires you to have a legal judgment for wage garnishment (Option 14, which is detailed in the law) ↑
Creditors rarely go directly to an employer and garnish as there is legal process which requires them first suing the borrower and obtaining a court order. This order will state the amount you owe, along with any extra charges or accumulated interest23.
Garnishment State Regulations
State Variability: Both the ability to garnish wages and how much can be taken out of each paycheck varies by state law. The federal check is the maximum garnishable portion (25% of disposable earnings29), but some states may go lower than this or offer additional protection for debtors30.
Protection from Firing: Under federal law, an employer may not dismiss you because of a single wage garnishment order. Otherwise, this protection does not apply if a second or more garnishments are in effect13.
Avoid Wage Garnishment Risk
If you know that changes in your life are going to affect how much money comes into the household, you might want to be proactive and get a negotiation going with your lender or creditors before it gets as far as repossession and wage garnishment.
There are legal avenues such as filing a claim of exemption or, if your money is already being taken from paychecks, you can take steps to offer proof they should be receiving nothing (owing $0) and there for have something called “Limited Liability.”
To summarize, wage garnishment may happen after repossession because of the deficit balance but there are rights and options that borrowers can use to minimize these potential results. With a better knowledge of local legislation and by keeping communication lines open with his or her creditors, the outlaw can go on eventually to lead healthy financial life.
