||Ask Dr. Don
Garnished wages on a repo
Dear Dr. Don,
Can an auto finance company garnish your wages if they have already
repossessed the automobile and that was more than six years ago?
When a car is repossessed you owe the lender the repo costs, the
costs they incurred in selling the car and the outstanding loan
balance after using the sales proceeds to pay down the loan. This
sum is known as a deficiency.
Some states allow the creditor to sue and win a deficiency
judgment while other states prohibit this practice. Your state's
Agency can tell you whether your lender can sue for a
Garnishment can happen when the lender or a collections
agency wins a court judgment against you for repayment. Unpaid judgments
also accrue interest at a rate stipulated by the court. In general,
garnishment is limited to 25 percent of your income, but an amount
equal to 30 hours worth of pay at minimum wage is exempt. The Consumer
Credit Protection Act spells out the rules concerning garnishment.
However, when a state wage-garnishment law differs from the federal
provisions, the law resulting in the smaller garnishment is used.
Lenders or collection agencies will sometimes threaten
to file for a judgment as a tactic to get the borrower to reaffirm
the debt before the statute of limitations ends the borrower's obligation
to repay. Partial payments or signing anything that reaffirms the
debt may preserve the lender's rights without going to court. Work
with an attorney if you're unsure of how to proceed with the lender.
Borrowers often see activity as an unpaid debt approaches
the statute of limitations for that loan. That's because a judgment
can keep the lender's claim active. In states where judgments can
be renewed, that claim can stay active until paid.
By now you should know what amount of money the lender
expects from you and whether they have won a judgment against
you. Your credit report will list outstanding judgments against
you. (Bankrate provides contact
information for all the credit bureaus.)
You also know your financial position. You have to
choose between paying the deficiency on your own, being forced to
pay though wage garnishment and taking a chance that the creditor
is just using scare tactics to get you to repay because they don't
want to go to court.
Depending on your financial circumstances, filing
for bankruptcy could make sense as a way to discharge this debt
without repaying the creditor.