Not all states allow wage garnishments for auto loans, but California does. Beyond that, however, the state is consumer-friendly and places some restrictions on how much your auto lender can garnishee from your pay if you default on a car loan. California law also provides you with a relatively easy way to avoid repossession in the first place.
The Judgment Process
If your auto lender repossesses your vehicle and you don't make arrangements to reclaim or "redeem" it within about 15 days, it will sell the car at auction. In most cases, the auto won't sell for as much as you owe. The lender can then go to court and get a judgment against you for the difference. Once it has the judgment, it can request a writ of execution and an earnings withholding order. The county sheriff serves the order on your employer, who is then obligated to garnishee your wages until the full amount of the deficiency balance is paid.
How Much Can Be Garnisheed
California defers to federal law with regard to how much your creditor may legally garnishee from your paycheck. It can take 25 percent of your earnings after taxes, or the difference between your pay and $217.50 before tax deductions, whichever is less. The $217.50 figure is 30 times the federal minimum wage, which was $7.25 per hour at the time of publication. If and when the minimum wage increases, this could be more. If you work 40 hours per week for minimum wage and earn $290, your creditor gets $72.50 per week, or the difference between $217.50 and $290, unless the taxes taken out of your pay would result in a lesser amount. For example, if $20 comes out of your pay for taxes, this would leave you with $270. Twenty-five percent of $270 is only $67.50, less than $72.50, so your creditor would only be able to garnishee this lesser amount. If you only make $217.50 per week, no garnishment is possible.
Your Options
Most lenders will settle with you for a portion of the deficiency balance, as little as half of what you owe. If your lender repossesses your car, trying to find the money to pay off 50 percent or so of the deficiency might be preferable to losing a portion of your wages every week until you pay off the full 100 percent. You could conceivably end up paying only $5,000 rather than $10,000. Paying off the full amount through a wage attachment might take a long time. You can also go to court and ask a judge to order less of a wage attachment if the amount your creditor is taking from you causes undue hardship for you and your family. Unlike other states, California law only requires that you come up with your past due payments plus the lender's repossession costs to redeem or get your car back within 15 days, so this is probably your least expensive option.
Tips
If you don't work on a wage, salary or commission basis, it's unlikely your lender can garnish your income in California. The state only allows garnishments from employee earnings, so if you work as an independent contractor, your income is usually safe.
0 comments:
Post a Comment