Debt Collection, Garnishment, Repossession

questions & answers

Question: I just recently had my car repossed and would like to know if the creditor can garnish my wages for the balance of the loan?


Yes, after repossession of the vehicle you (and all co-signers) will still be liable for the remainder of the car loan, and if a judgment is obtained, then creditor can garnish your wages. You have signed a contract and the bank will hold you to it. The loan company will repossess the vehicle, clean it, fix it, then sell it at an auction that is frequented by wholesalers, car dealers, and the general public. They will add the costs incurred in retrieving and cleaning the car to the balance, then reduce that balance by the amount the car sells for at auction. The remainder is called the “Deficiency Balance” and that is what you will owe. Since you signed the contract, you and any other co-signers will be liable for that deficiency balance for four years from the Date of Default. The date of default on an auto deficiency is usually the last payment you missed, the date the car was repossessed, or the date the auction proceeds were delivered. Usually those dates are all within about two months of each other. In order for the debt to be completely valid and collectible, the loan company must send you “The Article 9 Letters”. These consist of notices that are usually spread out among four specific letters to your most current residence:

1) Notice of Default and Acceleration of the debt.

2) Notice of Intent to Repossess

3) Notice that the car has been Repossessed and when it is going to be Auctioned

4) Notice of Deficiency Balance.

Here is an example of how that balance is calculated, assuming a typical repossession situation where the car is fairly valued at $14,000 per Kelly Blue Book:

 1) Current Balance of the car loan: $18,000

2) Cost of Repossession, new keys, and basic cleaning: $300

3) Cost of Damage Repairs (smashed fender, cracked windshield, etc.) $1,000

4) Amount car sells for at auction: $9,000 (remember this is a WHOLESALE auction! Cars sell cheap!)

Final Calculation: $18,000 + $300 + $1000 - $9000 = $10,000 Deficiency Balance.

This balance will usually start to accrue interest at the same rate of the original car loan, and will continue until the four years are up. It is not uncommon for a $10,000 balance to double due to interest in a few short years. You can fill in the numbers of what your car is worth and come to a decent estimate of what you may owe. Sometimes, if the loan is paid down enough you won’t owe anything, or may even get a refund after the auction. A person that owes a deficiency balance may be subject to collection calls and a lawsuit to recover the debt. If you have been sued, the case is not over until judgment is granted so you can still fight the lawsuit (this includes trying to settle it with the plaintiff or his attorney). Possible settlement offers that some plaintiffs accept: partial lump sum payment, fixed monthly payments, stipulate to judgment with a covenant not to execute on the judgment, and waived interest if payments are made on time. Citations: U.C.C. §2-725(1)


  • I just recently had my car repossed and would like to know if the creditor can garnish my wages for the balance of the loan?




  • Please select your county of residence below.



  • State Bar of Arizona
  • Maricopa County Bar
    Referral number 602-257-4434
  • Pima County Bar
    Referral number 520-623-4625
  • National Domestic Violence Hotline
  • Bankruptcy Court Self Help Center
  • Certified Legal Document Preparer Program


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