Car loan wage garnishment after a repossession

Losing the car does not always end the loan. After a repossession the lender sells the car and if the sale price does not cover what you owed plus the costs of taking and selling it, you can be liable for the difference, called a deficiency, under UCC 9-615. To take that from your wages, the lender still has to sue and win a judgment first, the CFPB says.

How a repossession turns into a wage garnishment

1. The car is taken or you hand it back.
2. The lender sends a notice of the sale and sells the car, often at auction.
3. It subtracts the sale price from the balance, adds repossession, storage and sale costs and asks you for the rest.
4. If you do not pay, it or a debt buyer sues. A judgment lets it ask the court for a garnishment order.

From there the federal cap applies: no more than 25% of take-home pay or the part above $217.50 a week if that is less, under 15 U.S.C. 1673. In Texas current wages are exempt from it and North Carolina courts cannot garnish wages for a car loan at all. See Texas or your state’s limit.

Check the deficiency math

The lender’s number is not the last word. It has to sell the car in a commercially reasonable way under UCC 9-610 and, in most cases, send you notice of the sale first under UCC 9-611. In a consumer case it also owes you a written explanation of how it calculated the deficiency, under UCC 9-616: the balance, the sale price, each expense and any credits.

Compare the sale price with the car’s value. A car sold far below value, a missing sale notice or fees that do not add up can shrink the deficiency and a court can bar it when the lender did not follow the rules; UCC 9-626 leaves consumer cases to the courts. Raise it in your answer to the lawsuit, not after the judgment.

How to stop wage garnishment for a car loan

• Before a judgment: answer the lawsuit and dispute the deficiency math. Ask for the 9-616 explanation in writing.
• After a judgment: file the exemption claim on your garnishment papers by your state’s deadline; some states protect more pay for a head of family.
• Settle: a deficiency is unsecured debt and lenders and debt buyers often take less than the full amount. Get the release in writing.
• Bankruptcy: a deficiency is usually wiped out and filing stops the garnishment. See bankruptcy and garnishment.

Not sure what the court papers say? Paste them in the notice reader above or see all the ways to stop a garnishment.