Question: I am 2 payments behind and trying to make arrangements but they are threatening to repossess the vehicle and then garnishee my wages… What can i do and can they do this? I told them i will get caught up within 6 weeks but they don’t care.
Answer: If you are behind on your payments on a car loan or lease, the lender does have the legal ability to repossess the vehicle, and sell it to recover the amount owing. If there remains a balance owing after they have sold the vehicle, they can take you to court and sue you, and potentially garnishee your wages.
While legally they can repossess the car and garnishee your wages, practically that is generally a last resort. The car lender doesn’t want to go through all of the hassle of seizing your car, selling it, and then suing you. They just want their money. You have the following choices:
First, talk to the lender, and make payment arrangements. Obviously they want all of their money now, and they will use the threat of seizing your vehicle to make you pay, but they don’t really want to take your car. They are making threats because you haven’t paid, so offer to make a payment when you get your next paycheque, and propose a plan where you will get caught up over the next month or two. If you have the ability to make extra payments and get caught up, they will probably allow you to do so.
Second, if the lender refuses to take your money, or if you don’t have the ability to get caught up, you will probably lose your vehicle, so you could consider voluntarily surrendering it to them.
If they do take the vehicle and pursue you for the shortfall, you have a few choices:
- Pay them, or work out payment arrangements
- File a consumer proposal or
- File bankruptcy in Ontario
Filing a proposal or bankruptcy immediately stops a garnishment, but obviously it’s better if you can work out a plan with them first to avoid having to file.
