If you're having trouble paying your bills, you might be forced to skip the car payment to your auto finance company. Your loan is secured by your vehicle, so once you are delinquent on a payment, the lender has a right to take it in an attempt to satisfy your account balance. In addition, the finance company can garnish your wages even after your car is repossessed and sold.
Repossession
Many states do not require you to be notified of an impending repossession ahead of time, but collection agents may contact you about the loan before you car is taken. Your car can be repossessed at any time, even if it's parked in your driveway, but the person repossessing your car cannot threaten you or break into your garage if the door is closed.
Deficiency Balance
The lender can sell your vehicle after a repossession to satisfy your remaining debt and any penalties or auction fees that have accumulated due to your default. In most states, you must be notified of when and where the car will be auctioned to give you an opportunity to buy it back. If it is sold for less than the amount that you owe, even if you buy it yourself, your account will have a deficiency balance that you must pay.
Judgment
If you don't settle the deficiency balance, the auto finance company can sue you if it still holds the lien on your vehicle title. If the loan has been sold to another company, then the name of the lawsuit will reflect the new lien holder. Once a judgment against you is entered in court, the lender has several options for collecting the rest of the money that you owe. The creditor can place a lien on your house, or your wages or bank accounts could be garnished.
Garnishment
The lender can present your employer with the judgment to garnish your wages for the deficiency balance until your debt has been paid. Federal law does not allow employers to garnish a total of more than 25 percent of your disposable income in any pay period, unless the garnishment is for child support, bankruptcy or unpaid taxes. Also, federal law prohibits your employer from terminating your employment for the sole reason that your wages are being garnished.
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