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How Bad Debt Can Be Bought & Sold

May 8, 2008
There are several industries in America growing exponentially as the debt problem in this country worsens. Debt counseling, debt consolidators, debt negotiators, and attorneys specializing in debt are all examples of this rapid growth. Another growing group benefitting from America's debt problems are buyers of bad debt. These companies purchase debts from businesses that have not been collected and assume the role of creditor for those borrowers. These companies aggressively pursue payment using various methods that put intense pressure on the borrower.

How do bad debt buyers get their hands on this debt in the first place? They purchase it for pennies on the dollar, or less sometimes, from established companies. The going rate depends on just how bad the debt is. Debts that are fairly recent that have not yet even been written off as losses may fetch as much as 12 cents on the dollar in the bad debt market.

Other debts, that have gone uncollected for much longer, maybe purchased for much less. More companies have entered this side of the market this decade than ever before, the biggest being a company called Asset Acceptance.

As bad debt buyers purchase billions of dollars in bad debt, the chief complaint from consumers has been abusive practices from these bad debt buyers as they attempt to collect. The number of complaints received by the Federal Trade Commission related to bad debt buys increased more than six-fold between 1999 and 2005. Some of the complaints include consumers being threatened with jail time if they fail to pay or bad debt buyers inflating the amount due, and then trying to get the consumer to agree to a partial payoff on this inflated balance.

Other consumers have been abused by borrowers allegedly contacted about debts years after the debts had been paid or erased in bankruptcy court. Another scary complaint from borrowers is that their new collectors threaten to take their old debt and "re-age" the debt, starting the time period over until the debt is wiped clean from the consumer credit report.

If you find yourself in a position where you're being harassed about old debts by creditors who have taken on your debt, there are a few factors that you should make yourself aware of.

First, educate yourself on the rules in your state surrounding statutes of limitations for collecting bad debts. It may be wise to contact an attorney who understands the details of your state's laws. Second, don't hold conversations with bad debt buyers on the phone, instead putting every correspondence in writing and insisting that they do the same. Finally, it's a good idea to check your credit report at least once a year to ensure that there is nothing questionable that might have been affected by one of your old debts coming back to haunt you.

Bad debt buyers spend billions of dollars in hopes of convincing consumers to pay their old obligations. Your old debts should be paid, but you also have rights as a consumer that will help you keep bad debt buyers at bay.
About the Author
If you're looking for ideas for reducing credit card debt, surf on over to the Debtopedia website at http://www.debtopedia.com. We offer plenty of helpful advice to get rid of credit cards and other debts, while saving interest in the process.
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