Will a Judgment Creditor Take My Car?

If you’ve been sued for a debt and you’re worried about whether the judgment creditor can take your car, here’s the short answer: It’s possible, but very rare. Creditors usually only pursue a car if it has significant value and isn’t already tied to a loan. Most people’s cars aren’t worth enough to make it worthwhile for a creditor to go through the trouble.

Whether your car is at risk depends on three main factors:

• Your car’s value: If your car is worth less than the state’s exemption amount, creditors can’t touch it.

• Any outstanding car loans: If you still owe money on your car loan, it reduces the vehicle’s value for creditors.

• Your state’s exemption laws: Exemptions, which vary by state, protect a certain amount of your car’s value.

In this article, we’ll explain how judgment creditors work, when they might try to take your car, and how you can protect yourself — especially with tools like bankruptcy. Let’s dive in!

What Is a Judgment Creditor?

A judgment creditor is a creditor that has sued you for unpaid debt and won the lawsuit. Here’s how this usually goes:

When you fall behind on a debt — like credit card bills, medical expenses, or personal loans — the creditor will first try to collect the money directly, by calling you and mailing notices. If those efforts fail, they might sell the debt to a collection agency or hire an attorney to file a lawsuit against you. If you get sued, you’ll receive a summons and complaint notifying you of the lawsuit and your deadline to respond to it.

If you ignore the summons or don’t show up in court, the judge usually grants the creditor a default judgment. This means the court automatically decides in the creditor’s favor because you didn’t respond. And if you do respond to the lawsuit but lose the case, the creditor will receive a court judgment against you.

Once a court judgment is entered against you, the creditor becomes a judgment creditor, which gives them more power to collect on the debt. At this stage, they can take steps like garnishing your wages, placing liens on your property, or freezing your bank account. This is when you might start worrying about whether they can take your car.

The good news is that creditors don’t always go after personal property like cars — especially if your car has little value or is already tied to a loan. 

How Do Creditors Enforce a Judgment Against Your Property?

Once a creditor wins a court order in a debt collection lawsuit, they can take steps to enforce the judgment and collect what you owe. What they can do depends on whether the debt is secured or unsecured and on the type of property you own.

If you have secured debt, like a car loan or mortgage, the secured creditor has a security interest in your property. This means they can repossess or foreclose on the property if you default. And they don’t have to file a lawsuit to do it.

If your debt is unsecured debt — like credit card debt, medical bills, or private student loans — creditors don’t have an automatic right to take your property. Instead, they must first file a lawsuit and win a court order to use collection measures like liens, wage garnishments, or bank levies. 

What Happens When a Creditor Puts a Lien on My Property?

If you don’t pay a judgment, the creditor can place a lien on your property, which gives them a legal claim to it. This means they have the right to collect the proceeds if you sell the property.

Creditors can place liens on two types of property:

• Real property, like land, home, or real estate you own

• Personal property, like cars, furniture, or household goods

In rare cases, a creditor can ask the court for a writ of execution. This is a court order that allows the county sheriff to seize and sell your property to pay off the debt. However, this process is expensive and rarely pursued — especially for personal property like cars — unless you own high-value property with a lot of equity.

What Property and Income Are Protected From Creditors?

State and federal laws protect certain types of property and income from creditors through exemptions. These exemptions limit what creditors can take, even if they win a judgment against you. Examples of exempt property include:

• A portion of the equity in your motor vehicle

• Essential household goods and clothing

• Income from Social Security, public assistance, and certain pensions

For instance, if your car’s value is less than your state’s vehicle exemption amount, creditors can’t take it, even if you owe a judgment.

What Else Can Creditors Do To Collect a Judgment?

In addition to placing liens, judgment creditors can use tools like wage garnishment or bank account levies. For example, if you have income that isn’t exempt, like Social Security or child support, a creditor can garnish a portion of your paycheck to repay the debt. If you have exempt income, you may be judgment-proof, which is addressed later in this article.

Can a Judgment Creditor Take My Car?

The short answer is: maybe, but it’s rare. Creditors typically won’t try to take your car unless it has significant value that isn’t protected by exemptions or it’s tied to a loan.

Why? First, your car needs to be worth more than what you owe on it. If you’re still making payments on a car loan, the loan reduces the car’s equity. For example, if your car is worth $10,000 but you still owe $8,000, there’s only $2,000 of equity. That small amount likely isn’t worth the effort for most creditors.

Second, state laws protect a certain amount of your car’s value through vehicle exemptions. As mentioned previously, exemptions limit what creditors can take from you after a judgment. Let’s say your state allows you to protect up to $5,000 in car value, and your car is worth $4,500. In this case, the car is fully protected, and the creditor can’t take it.

Even if your car does have value, the process of seizing and selling it can be difficult and costly. A judgment creditor would have to ask the court for permission to place a lien on your car or order the sheriff to sell it. Most creditors prefer simpler methods like wage garnishments or bank levies.

If you’re still worried about losing your car, you have options. Filing for bankruptcy can stop a judgment creditor in their tracks and protect your vehicle. We’ll cover how that works next.

Can Bankruptcy Protect My Car?

Yes, bankruptcy can help protect your car from judgment creditors. When you file for bankruptcy,  the automatic stay immediately takes effect. The automatic stay stops all collection actions, including lawsuits, wage garnishments, and attempts to take your property, including your car. Even if a creditor already has a judgment against you, they can’t take any further steps to collect the debt while the automatic stay is in place.

If you file bankruptcy before a judgment turns into a lien on your car, the bankruptcy process can prevent that lien entirely. This means your car will be treated like any other property in your bankruptcy case, not as something the creditor already has a legal claim to.

Most people who file bankruptcy can keep their cars because of bankruptcy exemptions. Similar to the vehicle exemptions explained previously, bankruptcy exemptions protect a certain amount of equity you have in your car. For example, if your car is worth $5,000 and your state allows you to exempt up to $6,000 of equity, your car is fully protected. Even if your car’s value is slightly higher than the exemption, bankruptcy trustees rarely sell cars with only a small amount of non-exempt value because it’s not worth the effort.

What If I Owe Money On My Car Loan? 

If you still owe money on a car loan during bankruptcy, you can generally keep the car as long as you stay current on your payments and follow a few rules. You’ll likely need to sign a reaffirmation agreement, which allows you to keep making payments on the loan during and after bankruptcy.

Bankruptcy can be a powerful tool to protect your car and other property from judgment creditors. It can also give you a fresh start by eliminating many of your debts. If you’re considering bankruptcy, acting before a creditor places a lien on your car can save you stress and protect your property.

How Do I Know if I’m Judgment-Proof?

If you don’t have income or assets that creditors can legally take, you may be judgment-proof. You may also hear this referred to as collection-proof. This means that even if a creditor wins a lawsuit and gets a judgment against you, they can’t collect the debt because there’s nothing for them to take.

To be judgment-proof, two key things must apply:

• Your income must come from sources that are protected by law, such as Social Security, disability benefits, or certain pensions.

• You must have no significant property or assets that a creditor can seize. For example, if your car has no value because of an outstanding loan or it falls entirely under your state’s vehicle exemption, creditors can’t take it.

Being judgment-proof doesn’t mean a creditor can’t get a judgment against you. They still can. But the judgment will be essentially worthless because they can’t collect anything from you. For example, if a creditor freezes your bank account but the money in it comes from Social Security benefits, they’ll have to return those funds.

Even if you’re judgment-proof, creditors or debt collectors may still try to pressure you into paying. You might receive phone calls, letters, or other collection efforts. While they can’t force you to pay, unpaid debts can still appear on your credit report and lower your credit score.

Many people in this situation still consider filing for Chapter 7 bankruptcy. Chapter 7 can stop debt collectors entirely and clear your debts for good, even if you’re already judgment-proof. It can also help you rebuild your financial future without the stress of ongoing collection efforts.

Let’s Summarize…

If you’re worried about a creditor taking your car, the good news is that most people who file for bankruptcy are able to keep their vehicles. Bankruptcy protections, like the automatic stay and property exemptions, can prevent creditors from placing or enforcing a judgment lien on your car.

That said, timing is important. If you’ve been sued, filing for bankruptcy before the creditor gets a judgment can protect your car and other property from a lien. If you wait too long, it becomes more complicated to deal with a judgment lien.

If you’re concerned about a creditor pursuing a judgment lien and you don’t have the money to pay, you still have options. Upsolve’s free tools can help you explore Chapter 7 or connect you with a bankruptcy attorney for a free consultation to assess your situation.