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What Happens if I Do Not Have Enough Money To Pay A Deficiency B

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Mark Cappel
UpdatedJun 7, 2024

If I do not have enough money to pay a deficiency balance, what will happen?

I recently had a vehicle repossessed and sold. The bank sent me a paper work to pay the balance. I cant afford to pay for this. What will happen if I do not live on a fixed income and have a old trailer for a home?

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 (you) 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. If you have a source of income that is not social security or a federally protected pension the most commons ways a creditor collects on the account are discussed below.

A creditor -- a debt collector that owns a debt account is a creditor -- has several legal means of collecting a debt. But before the creditor can start, the creditor must go to court to receive a judgment. A court (or in some states, a law firm for the plaintiff) is required to notify the debtor of the time and place of the hearing. This notice is called a "summons to appear" or a "summons and complaint." In some jurisdictions, a process server will present the summons personally.

Wage garnishment

The most common method used by judgment creditors to enforce judgments is wage garnishment, in which a judgment creditor would contact the debtor's employer and require the employer to deduct a certain portion of the debtor's wages each pay period and send the money to the creditor.

Levy bank accounts

A levy means that the creditor has the right to take whatever money in a debtor's account and apply the funds to the balance of the judgment. Again, the procedure for levying bank accounts, as well as what amount, if any, a debtor can claim as exempt from the levy, is governed by state law.


A lien is an encumbrance -- a claim -- on a property. For example, if the debtor owns a home, a creditor with a judgment has the right to place a lien on the home, meaning that if the debtor sells or refinance the home, the debtor will be required to pay the judgment out of the proceeds of the sale or refinance.

I encourage you to visit the resource State Consumer Protection Laws and Exemptions to learn about what consumer protection laws may apply to you. Please visit Collections Advice Web page to learn more about what happens when an account goes to collections.

Getting a wage garnishment, levy, or lien takes time, and time to a law firm is money. The law firm may settle for a lump-sum payment. See "Debt Negotiation and Settlement Advice" before opening negotiations with a creditor. See What are my debt resolution options? to learn more about your rights and options for resolving the debt.

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



Did you know?

Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q1 2024 was $17.69 trillion. Housing debt totaled $12.82 trillion and non-housing debt was $4.88 trillion.

According to data gathered by 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%.

Each state has its rate of delinquency and share of debts in collections. For example, in Oklahoma credit card delinquency rate was 4%, and the median credit card debt was $458.

While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.



BBill, Jul, 2010
The right of offset is a private right you may have agreed to when you signed the loan contract. There is no requirement that the bank file a lawsuit and receive a judgment to exercise the right.
AANNNA, Jul, 2010
How about if you have a deficiency balance that is 3 years old..can a bank legally go into your personal banking account to RIGHT TO SETOFF? Meaning if I am currently banking with the bank that I surrendered my vehicle to? Can they drain your account or does there have to be a court order and judgement for that?
BBill, Jan, 2010
Regarding the deficiency balance, the bank has no right to collect from your spouse regarding your deficiency balance, or any other separate debt you have. If you and your spouse maintain separate bank accounts (no joint accounts) then your spouse's separate accounts may not be levied.
KKristen, Jan, 2010
I live in NC. I have a deficiency balance. I don't currently have a job. My name is on a bank account I opened prior to meeting my husband. He works, but the money he makes services our current debts. This bank account is not linked to the bank I owe the deficiency to, nor was my husband a co-signor on this debt. Can they garnish his wages for my debt? Can they levy the fines from the bank account because it has my name on it?