What Happens When Your Debt Has Been Sold

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When you have owed money for an extended period of time, the original lender or collector will often hand your debt to a debt collection company or sell it to a debt purchaser. That debt collection company can then sell your debt to other companies. Your debt can actually change hands multiple times. This leaves a confusing trail and uncertain pattern to follow if you are trying to find out specific information about the debt.

Understanding Debt Collection

Debt collection is the process of pursuing payments of debts owed by individuals or businesses. Debt collectors use various methods to recover debts, including phone calls, letters, and lawsuits. Understanding debt collection is essential for individuals who are struggling with debt and want to know their rights and options.

Debt collection can be a complex and intimidating process, but it is essential to remember that debt collectors are bound by federal and state laws that regulate their behavior. The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from engaging in abusive, harassing, or deceptive practices. This means that debt collectors cannot use threats, profanity, or misleading information to pressure you into paying a debt. Knowing your rights under the FDCPA can help you navigate interactions with debt collectors more confidently and protect yourself from unfair treatment.

Can A Debt Be Sold to a Debt Collection Agency?

The answer to that is yes. Just because you originally took out a loan with one particular lender doesn’t mean that they’re required to hold onto it for the life of the loan. It’s quite common when a loan is falling behind for it to be sold to a different company that specializes in collecting old debts. This process of debt sold can have significant implications for the debtor.

There is a distinction between assigning the ownership right of the debt and just transferring the right to collect on the debt to a debt collector. Sometimes the debt stays with the original creditor, but there may be a new company that’s just collecting on their behalf. Creditors often sell debt to these companies to recover some of the money they are owed. Then there can be assignment of the debts as a whole. This may make little difference to you on the consumer side, but it’s just worth being aware of.

A very common question that we receive is, “I’ve read on Google that when these companies sell their debts, they sell them for pennies on the dollar. Why can’t I just pay this company pennies on the dollar to get rid of the debt?” While it may be that the company that acquired your debt paid less than face value in order to have the right to collect on the debt, that doesn’t mean that you absorb the same benefit that they got. When a debt is transferred, the company that acquires the transfer rights acquires the right to collect on the full balance, not the partial balance. This is particularly important if the case has gone to court, because if they get a judgment, and particularly a judgment by default, then they will seek to collect on the full balance of the debt often by garnishing wages or a bank account.

Why Do Creditors Sell Debts?

Creditors sell debts to debt collection agencies or debt buyers for several reasons. One reason is that creditors may not have the resources or expertise to collect debts themselves, particularly if a loan is behind. Debt collection agencies specialize in collecting debts and have the necessary resources and expertise to pursue payments effectively.

Another reason creditors sell debts is that it allows them to recover some of the money they are owed. When a creditor sells a debt, they typically receive a fraction of the original amount owed. However, this can be better than not recovering anything at all. By selling the debt, creditors can quickly recoup a portion of their losses and focus on their core business activities.

Creditors may also sell debts to debt buyers, who purchase debts at a discounted price and then attempt to collect the full amount from the debtor. Debt buyers may use various tactics to collect debts, including phone calls, letters, and lawsuits. While this can be a challenging experience for debtors, understanding the motivations behind debt sales can help you better navigate the debt collection process.

What To Do When Your Debt Has Been Sold to Debt Collectors

When your debt has been sold, there are certain things that you need to look for. Most importantly, you want to look for notice in writing. In Florida, you’re required to get notice in writing of debt that has been assigned. If you get that notice in writing, you may want to confirm with the company that used to have your debt, that the debt has in fact been assigned. *However, it should be noted that cases interpreting Fla. Stat. 559.715 have found the notification requirement is not a true condition precedent.

The other thing that you’ll want to check for verification is going to be your credit report. Your credit report is particularly important because what commonly happens when debt is assigned is that the credit reporting is re-aged. What is re-aged credit? When someone falls behind on a revolving credit line, there is a limited window of time for the company that you had the loan with to report the negative activity. Usually that window of time is seven and a half years, particularly with respect to credit card debt.

When debt is sold or assigned a lot of times, the new company that is collecting on the debt will treat the date of transfer like the first date that you fell behind. This can leave the delinquency on your credit report for a longer window of time, which extends the damaging impact to your credit.

What are your options when a company has sold your debt? For the most part, your options are nearly identical to the options that you would have with an original creditor.

You would first want to look at the age of debt and make sure that it’s still collectible. If a debt is too old, if it is past what’s called the statute of limitations period, it may be that the creditor can’t sue you on the unpaid debt. So even though the debt may exist, there isn’t anything they can do to collect on it. In this case your best option may be to do nothing. You also have the option of settling on the debt, either directly or with the aid of a professional.

Also, just like in the debt before it was transferred, you can assert your rights to control how you are communicated with, with respect to the debt. You can send the new debt owner a cease and desist letter, found pretty easily through Google search, asking that you no longer wish to receive communications with respect to the debt. You can also tell the new loan owner that certain communications aren’t convenient to you, like calls during working hours, or otherwise control the means of communication. If you have questions on debts that have been sold, please feel welcome to schedule a complimentary consultation with one of our qualified attorneys, we’ll be happy to evaluate your options for you.

Your Rights as a Debtor

As a debtor, you have several rights under federal and state laws. One of your most important rights is the right to be treated fairly and respectfully by debt collectors. The FDCPA prohibits debt collectors from engaging in harassing or deceptive practices, such as making threats or using profanity. This ensures that you are not subjected to undue stress or intimidation during the debt collection process.

You also have the right to dispute a debt and request verification of the debt. If you dispute a debt, the debt collector must stop collection activities until they provide verification of the debt. You can also request a debt validation letter, which is a written notice that includes information about the debt, such as the amount owed and the name of the original creditor. This helps ensure that you are not being asked to pay a debt that you do not owe or that has already been paid.

Additionally, you have the right to request that debt collectors stop contacting you. You can send a cease and desist letter to the debt collector, which requires them to stop all communication with you. However, this does not mean that the debt goes away, and the debt collector may still pursue legal action against you. It is essential to remember that debt collectors are bound by federal and state laws, and you have several rights and options available to you. If you are struggling with debt, it is crucial to understand your rights and seek help from a qualified professional if necessary.

Summing Up

Steps if Your Debt May Have Been Sold

1. Confirm that the debt has actually been sold. If you are unsure, it could be that the new debt collector is simply acting on behalf of the original lender and is not actually in charge of the debt. When a collection agency buys a debt, they have paid the original lender a portion of the debt so that they can now own the debt and, hopefully, collect the balance. To determine whether your debt has been sold, you can ask the company if they own the debt, or check to see where the payments are going. If letters instruct you to pay the company directly, then the company probably owns the debt.
2. Find out when the last time you made a payment was. Most debts have a statute of limitations, and when a new company purchases the debt, they will try to collect whether the statute is up or not. If you ask if the debt is time-barred, or subject to a statute, the collector must respond truthfully, as required by the Fair Debt Collection Practices Act. If you believe the debt has been in existence for a long period of time, hold off on communicating with the company before seeking legal counsel. Never make a payment or acknowledge your debt without speaking to a professional attorney. You may be putting yourself in a vulnerable position, and paying a debt that no longer applies.
3. If you do come up with a payment plan that works for you, confirm the payment plan in writing. You will particularly want to confirm the payee, depending on whether the loan was sold or just the collection rights. You’ll also want to make sure to closely track the payment dates and method of payment.
4. If you are sued by the debt collector, contact an attorney right away – don’t panic! By selling your debt, your original lender has actually put you in a better position. Your original lender would have access to more of your information and payment history which would help them build a better case than a debt collection agency. If you seek experienced legal counsel, they should be able to help you.

At the Ziegler Diamond Law, we help Florida consumers get in control of defaulted debt by defending collection lawsuits and consumer bankruptcy. Contact us today for a complimentary consultation.

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