Advice on Wage Garnishment on Account of a Repossession Balance

Will a 7 year old balance on my repossession, still effect my credit?

Hi, About 7 yrs ago, I bought a car for my sister. She lost her job and could not make the payments. I refused to make any of the payments for her, hoping she would get a job soon...but the car got repossessed. The car was in my name only. The lender is Ford Motor Credit. They successfully garnished my wages for a brief amount of time, but I switched jobs. Now they have sent an audit to my current employer. My question is this: Since it has already been about seven years, would it even be worth it to file bankruptcy? Or would filing bankruptcy only make my credit worse and extend the amount of time I have suffered derogatory credit? Also, if it is discouraged for me to file bankruptcy, what other alternatives do I have to get avoid wage garnishment?

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Highlights


  • Understand the effects of car repossession.
  • Learn about how long a judgment can be enforced.
  • Consult with a bankruptcy attorney, as a way to stop a garnishment on your wages.

Thank you for your question about car repossession and its effects on your credit.

Repossession usually leads to a deficiency balance

When a vehicle is repossessed, the lender will sell the car at auction and apply the sale price at auction to the amount that you still owe on the original car loan. If the auction does not net enough money to cover the full balance of the note, which it rarely does, then the original borrower would owe the difference, called a deficiency balance, to the lender. The creditor can collect on the deficiency balance like any other unsecured debt, up to and including filing a lawsuit against the borrower. In your case, since Ford Motor Credit has garnished your wages, I assume that it filed a lawsuit and obtained a judgment for the deficiency balance owed on the vehicle. Once a judgment has been obtained, bankruptcy is one of the few definitive ways to prevent the creditor from proceeding with executing on the judgment, which can include wage garnishment, property liens, and bank levies.

Communicate directly with the creditor

The creditor may be willing to work with you to establish a repayment plan which you can afford, to help you avoid bankruptcy. If you want to try to repay this debt and prevent further collection efforts by the creditor, I would encourage you to contact the creditor to discuss possible repayment arrangements. Ford Motor Credit may be willing to forgo further judgment execution if you can commit to reasonable regular monthly payments. However, if you cannot, or are unwilling to, make payments, it is likely that the creditor will continue to try to execute on its judgment, in which case a bankruptcy filing may be your best option.

How long can a judgment be enforced?

The length of time that a judgment can be enforced varies from state to state, but in most cases it is significantly longer than seven years. For example, in several states, judgments are valid for twenty years from the date of entry, plus they can be renewed twice if the judgment creditor chooses to renew them, meaning that the judgment can actually be collected for up to sixty years. Again, the length of time that judgments are valid varies from state to state, so if you think that you may be reaching the outside limit for the collection of judgments in your state, I would encourage you to consult with an attorney to discuss your stateÂ’s law regarding judgments. For more information about how long judgments can be enforced in your state, you should read this article about judgments and credit reports.

Consider filing bankruptcy

Given the length of time the creditor can enforce its judgment, and the fact that it is again trying to garnish your wages, a bankruptcy filing may be the best solution to resolve this debt. However, many factors must be considered before deciding to file bankruptcy, such as your income, your assets, your expenses, and your future plans. I strongly encourage you to consult with a qualified bankruptcy attorney in your state to help you determine if bankruptcy is a practical solution to your financial troubles. While it is true that bankruptcy will appear on your credit profile for ten years from the date of discharge, you may find that the benefits of ridding yourself of this debt outweigh the negative impact that filing for bankruptcy protection is likely to have on your credit rating. For more information about bankruptcy, I encourage you to visit the Bills.com Bankruptcy page.

As I mentioned previously, I strongly encourage you to consult with an attorney to determine what action this creditor can take against and if bankruptcy is a viable solution. I also invite you to visit the Bills.com Debt Help page for more general information and suggestions about how to deal with mounting debt.

I wish you the best of luck in resolving this outstanding account.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

14 Comments

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  • 35x35
    Sep, 2010
    Bill
    The first step I would take is to speak directly with the lender to hear what options the lender presents you. You are correct that you would be liable for any deficiency balance, were the car repossessed. I cannot tell you definitively, but it does not seem that the car qualifies as stolen, if she is one of the owners. In your position, I would seek a free consultation with an attorney, to see what recourse is available. Here is some helpful advice on how to find an attorney.
    0 Votes

  • 35x35
    Sep, 2010
    Jonathan
    I am in a situation that's leading towards the repo consequences of the original question. My situation: 1) I am the primary on the loan for the car. 2) The person (co-signer) paying for the car has stopped paying. 3) There are 2 names under the CA DMV registration. 4) The second person on the loan has the car in their possession and I don't know where they are. I wanted to know my options. What I have researched so far is: 1) They creditor repoes and I have to pay deficiency balance. 2) How do I get the car in my possession? Can I call the police to report the car stolen even though she is under the registration? Then take the car and restore the loan to be current. Any advice would be helpful. Thank you. Jonathan
    0 Votes

  • 35x35
    May, 2010
    Bill
    You are paying the deficiency balance. Please reread the first paragraph of the main answer above for the definition of a deficiency balance.
    0 Votes

  • 35x35
    May, 2010
    Karen
    If I am being garnished for a repossessed car, how come I don't get the car after paying over $10,000 for it?
    2 Votes

  • 35x35
    Feb, 2010
    Bill
    The reason you are being garnished may have nothing to do with the mileage on the vehicle. What has happened here is that failure to make payments on a vehicle can result in a repossession. When a vehicle is repossessed and auctioned off it is sold to the highest bidder. This usually results with the auctioned price being much lower than the market value of the vehicle. If you believe your rights have been violated in some way I encourage you to speak with a licensed attorney in your state. Please read an article I wrote, voluntary repossession.
    0 Votes

  • 35x35
    Feb, 2010
    Jen
    We had a car repoed in 2007. My husbands pay just began getting garnished. When we purchased the car the dealership lied to the bank about how many miles were on the car. My bank papers say one amount and the title and dmv show another. Is there anything we can do to stop the garnishment due to this? We live in NYS
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    The statute of limitations no longer applies once wage garnishment begins.
    0 Votes

  • 35x35
    Feb, 2010
    carissa
    does the statute of limitations start over after they have garnished your wages?
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    You did not mention your state of residence, so I cannot tell you with any degree of certainty if judgment-creditors are allowed in your state to garnish wages without notice or a hearing. Most states do have that requirement, so it is likely that the garnishment order can be reversed, albeit temporarily. Consult with an attorney in your new state who has experience in employment law. If you cannot afford an attorney, contact your county bar association and ask for the name of the organization in your area that provides legal assistance to low- and no-income people. Make an appointment with that organization and bring all of the documents and letters you have regarding the debt and the garnishment to that meeting.
    1 Votes

  • 35x35
    Jan, 2010
    Rick
    My vehicle was repossessed after making almost 5 years of regular payments due to being laid off of work. FMC filed against me in court, which the Judge ruled in my favor as I was still unemployed and working to find a new job. Shortly after, I moved out of the state to try and find a new job. After several months of no job, I finally was able to gain employment. I just received a letter stating that my wages will be garnished to pay for the remainder of the balance on the vehicle. Apparently, they refiled and won. I was never made aware of the refile nor given any information that a new judgment was made, so I had no way to make a rebuttal. Was it legal for them to do this? I barely make enough to make ends meet and have my kids I'm trying to take care of. what should I do?
    0 Votes

  • 35x35
    Apr, 2009
    Bill
    Be straight forward and have all documents that prove your income and expenses, and let the creditor know how much you can afford to pay realistically. As the judge seems to be sympathetic to your case, you should be able to reach a payment agreement that you can afford.
    0 Votes

  • 35x35
    Apr, 2009
    phillip
    my wages are bieng garnised 25% a week we went and appealed in court the judge said because of my wifes much needed medication and propane for heat and cooking we can have the garnisment reduced but we have to deal with companys lawyer what is your best advice to approuch this as we have already lost our home and my hrs are lower please advise thank you phillip holmes mariposa ca 95338
    0 Votes

  • 35x35
    May, 2008
    Bill
    Please read through this article: http://www.bills.com/rebuild-credit/
    0 Votes

  • 35x35
    May, 2008
    Cindy
    I am closing on a ten yr date from bankruptcy filing. 10 yrs will be up in July 08, I need to clean up my credit report in a serious fashion. I have no clue how to do it. My rating is in very sad shape I think currently. I think with help it can dramatically be cleaned. I don't have the money to pay an attorney or whomever. Any suggestions will be helpful. thank You. Cindy
    0 Votes