When a person owes money to a creditor and fails to repay the creditor according to the terms of his contract, the creditor may take a number of actions to receive payment of the money owed. If the creditor is able to receive a legal judgment in civil court, he may be allowed to garnish the person's wages. However, he can't garnish other transactions, such as the payment on the loan of a car.
Car Loan
When a person takes out a car loan, she typically agrees to pay back the lender in a series of payments, usually made once a month, over a number of years. These payments count as a form of income for the lender and an expense for the borrower. This loan is considered "secure" if the car is used as collateral. This means that the lender can seize the car as compensation if the borrower defaults on the loan.
Garnishment
If the borrower owes a creditor money, the creditor may petition a judge to allow him to garnish the debtor's wages. Generally, a creditor is required to receive approval from a judge and then approach the debtor's employer. Whether the lender of a car loan or the borrower making payments owes a creditor money, the money turned over when the borrower makes a payment can't be garnished by an outside creditor.
Account Freezing
Although the money turned over in the payment of a car loan can't be seized as it's being paid, it may be seized at a different time. A creditor can petition a judge to freeze the bank account of a debtor; the creditor can then seize money from this account and use it to pay back a debt. Although a transaction can't be intercepted, the money may be seized after it has been deposited.
Asset Seizure
Under U.S. law, private property can't be seized by a creditor unless the debtor has granted contractual permission to the creditor to do so in the event of a default. So, were a borrower to default on the car loan, the lender could likely seize the car as payment. Outside parties can't, however, seize the car, nor can they seize the money used to pay for the car.
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