Garnishment Exemption

• Federal law allows a creditor that has won a debt lawsuit to garnish up to 25 percent of your earnings for private debts, including repossession deficiencies. However, it also permits individual states to provide greater wage garnishment exemptions than federal law. Under Texas law, all of your wages are exempt from garnishment for debts except child support and taxes. This means that your earnings from your job are protected against garnishment to pay a repossession deficiency.
  
  

Exceptions

• A lender may use one of two exceptions to circumvent the wage garnishment exemption imposed by Texas law. If your car was repossessed when you lived in another state, the creditor may have obtained a judgment in that state, and may use that state's laws to execute a wage garnishment order. Moreover, if you live in Texas, but are employed in another state, the lender may petition the court for redomestication of the judgment to the state where you are employed. This may allow the lender to execute wage garnishment to recover the repossession deficiency.
  
  

Other Collection Methods

• Although a lender cannot garnish your wages for a repossession deficiency in Texas unless an exception applies, it may use other collection methods to recover the deficiency after obtaining a judgment. Texas law permits the garnishment of bank accounts -- if you deposit your earnings into a checking or savings account, the lender may seize the funds. The lender may also obtain a lien on your home or personal property, and may liquidate the property if there is sufficient non-exempt equity to pay for the deficiency.
  
  

Considerations

• Taking steps to avoid repossession can help you avoid credit damage and transportation problems as well as the risk of bank garnishment and liens created by a deficiency judgment. Contact your lender as soon as you know you will not be able to make your payments -- the lender may agree to a temporary forbearance or an alternative payment agreement to help you avoid repossession. If all of your debts are delinquent, bankruptcy may allow you to erase or reorganize your debt without repossession. Texas law permits you to exempt $60,000 in personal property, which can include your vehicle, from liquidation in a Chapter 7 filing. Chapter 13 bankruptcy, which involves making payments toward your debts based on your income, can also allow you to prevent repossession.