Can a Debt Collector Collect on a Repossessed Leased Vehicle?

If you fall behind on your payments on a leased vehicle, your lessor will likely contact you in an attempt to help you bring your account current. However, if you do not bring your account current, your lease agreement gives the lessor the right to repossess the vehicle. You might assume that repossession relieves you of the obligation to make future payments under your lease; however, the lessor or a debt collector may still collect from you after a repossession.

Deficiency

After a lessor repossesses a leased vehicle, it will typically sell the vehicle at an auto auction to recover some of the amount you owe under the lease agreement. Although the lessor must sell the vehicle in a "commercially reasonable" manner, it is not required to demand a selling price equal to your lease debt. Typically, the auction price of the repossessed vehicle is not sufficient to cover your lease, storage fees, repossession charges and other fees -- the difference between what you owe and the sale price is called a deficiency.

Collection of Deficiency

Although you no longer have possession of the leased vehicle after a repossession, you are still responsible for paying the deficiency. The lessor typically uses a third-party collection agency to pursue payment of the deficiency by sending you collection letters and placing telephone calls to your home and work. In some cases, the lessor may authorize the debt collector to accept a settlement for less than the deficiency; however, in other cases, the lessor may demand full payment.

Deficiency Judgment

If you ignore a debt collector's attempts to collect a lease deficiency, the lessor or debt collector may file a lawsuit to obtain a judgment against you. A judgment is a legal affirmation that you owe the deficiency, and that the lessor or debt collector has the right to use additional strategies to collect the deficiency amount. You will have an opportunity to respond to the lawsuit, but the court will not typically dismiss the suit unless you can prove you have already paid the deficiency.

Post-Judgment Collection

After obtaining a judgment against you for the deficiency, the lessor or debt collector may order your bank to freeze your accounts and send funds held in the accounts to the court for payment against your deficiency. In most states, it may also contact your employer to garnish a portion of your earnings. Although sale of personal property is uncommon, a collector or lessor with a valid judgment may order the sale of your property if the deficiency is sufficiently large.