Do Collection Agencies Buy debt?

Discussion in 'Credit Talk' started by Bushka, May 3, 2006.

  1. Bushka

    Bushka Well-Known Member

    I was discussing my debt problem with an attorney-friend today. He said that a collection agency will buy debt from the credit card company at a discount, and are happy if they can collect even 1 or 2 percent of the total debt purchased. Then they will sell off some of their debt to another collection agent, and so on down the line. He said that it is extremely rare for a collector to go through with a lawsuit. He knows of several debts of about $14,000, $5,000 and $6,000 and so on that were never pursued -- just dropped.

    In my case, I have some large debt (3 cards at $20K each), but show no income. My only asset is 25% ownership of a house that I don't live in, and that I have a new mortgage on. This house will probably be sold soon, and the bank will get nearly my entire share. The collection agent really can't get anything out of me, but I wonder if they will even pursue legal action anyway?

    Is my friend all wet, or is he correct?

    Thanks for any responses.

    bushka
     
  2. knielsen74

    knielsen74 Well-Known Member

    He right about the junk debt buying, but he's offering anecdotal evidence as far as lawsuits go. Almost ALL CAs (and especially JDBs) will sue in court, mainly for the hope of default judgment.

    And it seems likely that most debt cases do end in default judgment, because the debtors are either scared or feel that there's no reason to fight it. They feel defeated.

    And those who sue for large debts know that default judgment resets the SOL clock...sometimes (in some states) for more than a decade.
     
  3. Bushka

    Bushka Well-Known Member

    So is it any worse credit-wise to have 3 credit card judgments rather than 1?

    thanks,
    bushka
     
  4. bj2964

    bj2964 New Member

    Hey I guess a better question is: Is it legal for them to buy the debt and then collect money from you that they didn't pay?

    Someone told me once that once they buy the debt legally you don't owe it anymore, is that true?
     
  5. ontrack

    ontrack Well-Known Member

    It's legal if the seller of the debt owns it. It does not matter what they paid for it compared to what is owed.
     
  6. BrokeChick

    BrokeChick New Member

    The answer to the OP is: They can sue; indeed JDBs do that. All the time. That is really what they are buying when they buy debt: A perpetual, transferrable right to collect, with the right to sue, and keep the proceeds in exchange for the nominal purchase price.

    Why would they bother suing on the "junk"? You have to remember that the "shelf life" (SOLC) for a judgment is normally much longer than that for a debt where no judgment has been rendered and filed: Often, this can go for 20 years or more, and in some states, judgments never expire!

    What the JDB is hoping for by suing the currently insolvent is two things:

    1.) As has been mentioned, a default judgment. This sets up a new debt, even if the original one was "out of statute", which remains collectible and reportable--with the attendant consequences to one's credit standing--for years.

    2.) They are also betting that your financial situation will change for the better before the judgment is no longer enforceable. Let's face it, unless you die while you are still "judgment proof", the chances that you will recover financially are excellent.

    So, all the JDB has to do is sit and wait. Or, sell the new debt--the judgment--to another party and let them wait...and collect later on. You can stymie the first one by answering the complaint. The second can be handled by either settling out of court with a "stip", or a vigorous defense should they sue.

    This would be easier than you think: With a JDB, the documentation is rarely part of the debt package, and they won't bother (or are precluded legally by the terms of the sales contract from obtaining) to get it. If they even can: These debt portfolios go through brokers in most cases, and may have been to more than one JDB before the one who owns the account now bought it.

    That is one defense (among many) against a lawsuit filed by a JDB: Challenge the chain of assignment--they might not have the right to collect at all if the assignment of the debt to them proves to be defective.
     

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