A money judgment is a specific court order directing you to pay a plaintiff a stated amount in a lawsuit. The plaintiff may try to take your car to collect a money judgment if you do not pay it voluntarily. Generally, a plaintiff can seek a court order to seize and sell a debtor's personal assets. Your car is considered a personal asset and, therefore, may be up for grabs. There are some exceptions to the rule, though, so don't buy your bus pass quite yet.
TL;DR (Too Long; Didn't Read)
If a judgment is entered against you, it is possible for your car to be seized to pay off the debt.
Judges Can Order Car Seizures
A judge can order seizure of your car to pay off a money judgment. The order directs a court officer, sheriff or deputy to take and sell the car at auction. The proceeds are used to pay the court officer, court costs and the judgment. Any remaining funds are generally turned over to the debtor. If there are not enough sale proceeds to pay the entire judgment, additional assets can be seized until the judgment is paid in full.
Problems with Seizing Cars with Loans
It may be impractical to seek the sale of your car if you have an auto loan. The loan must be paid before the money judgment. There may not be enough equity to pay the loan, court officer, court costs and judgment. You should inform a court officer if your car has a loan against it. You should also provide a copy of the court order for seizure to your lender. It may stop a seizure or sale.
Leased Cars Cannot Be Seized
If you lease your car, it cannot generally be seized to satisfy a money judgment against you. Only assets you own are subject to seizure by a plaintiff. Since a leased car is legally owned by the lessor, it is not reachable by your creditors. Generally, the only way to lose a lease car is to miss the payments to the lessor. So, if you make your lease payments, your car is likely safe from seizure.
Bankruptcy Stops Judgment Creditors
A Chapter 7 bankruptcy proceeding is designed to permanently discharge debts. All other courts are stopped from seizing assets while a bankruptcy proceeding is pending. If a money judgment debt is permanently discharged, all assets you are allowed to keep after bankruptcy are protected from seizure by the plaintiff. Bankruptcies are complicated proceedings. They generally include liquidation of assets and have negative consequences to credit ratings. Seek legal counsel and consider all other options before filing for bankruptcy.
Maggie Lourdes is a full-time attorney in southeast Michigan. She teaches law at Cleary University in Ann Arbor and online for National University in San Diego. Her writing has been featured in "Realtor Magazine," the N.Y. State Bar's "Health Law Journal," "Oakland County Legal News," "Michigan Probate & Estate Planning Journal," "Eye Spy Magazine" and "Surplus Today" magazine.