Can Car Loans Garnish Your Wages?

A “wage garnishment” (or “wage attachment”) is an order from a court or government body directing your employer to deduct a specified amount from your salary and send it to your creditor. 

The number of wages that can be garnished by a creditor is determined by the type of debt and federal and state garnishment limits.

Who Can Garnish Your Wages

In general, any creditor has the right to garnish your earnings. 

However, some creditors must first meet additional conditions. 

Before garnishing earnings, most must first file a case and get a money judgment and court order. However, a court order is not required for all debtors. It is conditional on the type of debt.

Car Loan and Wage Garnishment.

Repaying a car loan can certainly be challenging. 

An automobile loan firm can garnish your income to cover the difference between the vehicle’s sale price and your outstanding loan balance if it is legal in your state. 

Wage garnishment, on the other hand, is usually a last resort because it requires the lender to bring a lawsuit against you, requesting that the court uphold the contract’s provisions and compel you to repay the deficiency. 

After the court issues a judgment, the lender can request a garnishment order or writ. 

It then goes to your employer, who is required to deduct a portion of your wages to send to the lender.

Fortunately, many lenders prefer to work with you to develop a payment plan or negotiate a settlement rather than garnishing your earnings if you can’t pay the deficiency out of cash.

Limit of Garnishment as Stipulated by Law 

Some states have their regulations governing the number of money creditors can deduct from a worker’s wages, while others adopt federal guidelines. 

Garnishments are limited by federal law to 25% of your disposable after-tax earnings or the sum over 30 times the minimum wage, whichever is smaller.

Your repossessed vehicle may sell for more than you owe on rare occasions. If you’re near to paying off the loan, this could be the case. The lender would have no motive to sue you and could not garnish your wages in this situation. In most states, it is required to repay any excess sales revenues to you.

How to Get a Wage Garnishment Reduced or Removed.

When your income is reduced by wage garnishment, it can be difficult to make ends meet. You have options, which is wonderful news. You might, for example, be able to:

• Reduce the garnishment by submitting a claim of exemption with the court.

• File for bankruptcy to get rid of the debt (and garnishment).

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