- 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.
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?
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.
Did you know?
Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q2 2022 was $16.15 trillion. Auto loan debt was $1.50 trillion and credit card was $0.89 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
The amount of debt and debt in collections vary by state. For example, in Kentucky, 32% have any kind of debt in collections and the median debt in collections is $1282. Medical debt is common and 17% have that in collections. The median medical debt in collections is $491.
To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.