Just What Is Debt Buying Anyway?

Despite the fact that credit and debt are everywhere in our lives, forming some of the basic foundations of modern life – we simply could not exist in modern society without some forms of credit – many people do not understand debt buying.  But if you hold debts of any kind, you should be aware of what debt buying is and how the process could potentially affect you.

Debt buying is a process where a company purchases debts from another.  For example, say you owe a credit card company one thousand dollars.  The credit card company sells that debt to collection agencies or another entity, and the agency now own your debt.  You no longer owe the money to the credit card company, but to the agency.  Typically, creditors sell debts at a steep discount because they have been unable to collect on the debt and would prefer to get something rather than nothing.  On the other hand, companies purchase these debts because they will attempt to collect on thousands at a time – with the steep discount on the cost of the debt; even if only a small number of debts are cleared, they make a profit.

Debt Buying and You

You still owe the full amount when your debt is sold, even if you are unaware of the sale.  If attempts to collect on the debt are made by a new owner, there a few things every consumer should know:

• Check the details.  Collection agencies often launch thousands of collection attempts on purchased debt simultaneously, and numerous mistakes in paperwork – including an inability to prove ownership of the debt with origination paperwork – are common.  Often lawsuits concerning the debt can be stopped simply by pointing out paperwork errors.

• Always consult an attorney.  A lawsuit to collect on a debt, whether by the original creditor or a debt buyer, is still a lawsuit and you should behave accordingly.

Always remember: Debt buying changes the players in a debt situation, but not the rules.