Can My Wages Be Garnished After My Car Has Been Repossessed?

Yes, they can. But let’s back up for a moment and examine why this could be the case.

When you purchase a car, you enter into a basic financing agreement (unless you buy the car outright, in which case the former owner simply transfers title to you). This agreement lays out a number of provisions, including what happens if/when you fail to make good on your monthly payments. Failure to make monthly payments can/will result in a repossession of the car (wherein the creditor sends someone out to collect the collateral). Once the car in back in the creditor’s possession, you have the opportunity to buy out the loan, file for bankruptcy (typically a St. Louis Chapter 13 bankruptcy), or simply allow the creditor to keep the car and sell it to someone else.

If you opt for the latter option (i.e. you allow the creditor to sell the car), then the creditor will sell the car to the highest bidder. Almost always, this sale will result in a deficiency. The deficiency that is created by the sale could be thousands of dollars. For example, if your car at the time of repossession had a loan balance of $15,000.00, and the creditor sold the car for $8,000.00, there would be a deficiency of $7,000.00 (which is of course the difference between the balance of the loan the amount it sold for). The creditor will at this point expect you to make good on this deficiency.

If no arrangement is made between you and the creditor in regards to the deficiency, they will most likely sue you for breach of contract. The judge will most certainly rule in the creditor’s favor. This in turn gives the creditor the opportunity to move forward with a wage garnishment (in which up to 25% of your net income is sent straight to the creditor, or 10% if you claim head-of-household status).

It is at this point that filing for bankruptcy becomes a viable option. Such a filing stops the garnishment, discharges the underlying debt, and also gets rid of any other existing unsecured debt that you might have (credit cards, medical bills, payday loans, etc.). The St. Louis bankruptcy attorneys at The Bankruptcy Company have been stopping garnishments (and all the other tricks that creditors pull) for years. Our staff has the experience and knowledge to handle such situations, and get you the fresh start / clean slate that you deserve.