What Happens When Your Debt Has Been Sold
When your debt is sold, the original creditor transfers ownership of the debt to a debt buyer or collection agency. The new collector now has the legal right to pursue you for repayment. Typically, the original creditor will notify you that the debt has been sold and provide the contact details of the new debt collector. This usually happens after the original creditor’s own attempts to collect the debt have failed.
Often, the original creditor will sell the debt for a fraction of its value, sometimes for just pennies on the dollar, which means the debt buyer has purchased it at a significant discount. Despite this, the new collection agency can still pursue you for the full amount owed. They may use various collection methods, such as contacting you directly, reporting the debt to credit bureaus, or even taking legal action, depending on local laws and the specific circumstances of 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.
What Happens When Your Debt Has Been Sold
When your debt is sold, the original creditor no longer has control over the debt. Instead, a debt buyer or collection agency takes over the responsibility of collecting the amount owed. Here’s what happens when your debt is transferred:
- Notification: The new collector is required to notify you that they now own the debt. This notice should include the details of the debt, including the amount you owe and instructions on how to make payments.
- Sale for Less: The debt buyer typically purchases the debt at a fraction of its original value, often for pennies on the dollar. Although they paid much less, they are still entitled to collect the full debt amount from you.
- Legal Rights of the New Collector: Once the debt is sold, the new collector has the legal right to pursue repayment. They can contact you directly, report the debt to credit bureaus, and, if necessary, take further legal action to recover the funds.
- Debt Collection Methods: Depending on the circumstances, the new creditor may engage in aggressive collection tactics such as wage garnishment, filing a lawsuit, or seeking to place liens on your property.
It’s important to verify the legitimacy of the new debt collector and ensure that the debt is valid. If you believe the debt is incorrect or if the collection efforts seem excessive, you have the right to dispute the debt and seek guidance on how to proceed.
Your Rights as a Debtor
- Fair Treatment: Debt collectors must treat you fairly and respectfully. The Fair Debt Collection Practices Act (FDCPA) prohibits harassment, threats, profanity, and unreasonable communication times.
- Debt Sale: If your debt is sold to a new collection agency, the debt is not erased. You are still responsible for paying it, but now the new collector is your creditor.
- Right to Verify Debt: You have the right to request verification of the debt, even after it’s sold. The new collection agency must provide details such as the amount owed and the name of the original creditor.
- Disputing the Debt: If you dispute the debt, the collector must stop collection activities until they provide proper verification. This protects you from paying a debt that may not be yours or is incorrect.
- Cease and Desist: You can request that debt collectors stop contacting you by sending a cease and desist letter. While this halts communication, it does not eliminate the debt, and the collector can still pursue legal action.
- Protection under the Law: Your rights under federal and state laws remain intact, even after a debt is sold. If you believe a collector is violating your rights, you can take steps to challenge their actions.
- Seek Professional Help: If you’re struggling with debt or feel your rights are being violated, seek help from a qualified professional to protect your interests.
Steps if Your Debt May Have Been Sold
- 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.
- 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.
- 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.
- 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.
How the Sale of Your Debt Affects You and Your Rights?
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. This transfer of ownership can create difficulties in tracking who owns the debt at any given time, leading to potential confusion about whom to communicate with. With each transfer, it’s crucial that you are notified by the new debt holder, as failure to do so can be a violation of your rights.
Additionally, the new debt collector may not have full records of the original debt, and this can lead to discrepancies in the amount owed, interest rates, or even fees that were not part of the original agreement. While you are still obligated to pay the debt, these errors can be used to dispute the validity of the debt. It’s also important to understand that your rights remain the same, no matter how many times the debt is sold. Under the Fair Debt Collection Practices Act (FDCPA), the debt collector must adhere to strict rules regarding harassment, misrepresentation, and unfair practices. If you feel that a debt collector is violating your rights or if they are attempting to collect a debt that isn’t yours, you have the right to challenge the debt, request validation, and even file a complaint with the Consumer Financial Protection Bureau (CFPB).
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 debt relief attorneys in Florida, we’ll be happy to evaluate your options for you.
Related Videos on Unpaid Debts
Understanding how unpaid debts affect you is crucial, and our related videos provide in-depth insights into the complexities of debt collection. From the legal rights you have when your debt is sold to a collection agency, to steps you can take to protect yourself from harassment, these videos guide you through the process. You’ll learn how to dispute debts, communicate with collectors, and manage debt recovery more effectively. If you’re struggling with unpaid debts or need professional legal advice, call us today for a free case evaluation in Clearwater at (727) 538-4188 or Tampa at (813) 225-3111.
Summing Up
When your debt has been sold to a collection agency, it’s crucial to understand the process and take proactive steps to protect your rights. Confirm whether your debt has been sold, look for written notice, and monitor your credit report for any re-aging of the debt. Be aware of the statute of limitations on your debt, and if you dispute it, request proper verification.
You also have the right to control communication with debt collectors and can negotiate payment terms in writing. If you are sued, seek legal assistance immediately to ensure you’re treated fairly. Understanding these steps and knowing your rights under federal and state laws can help you navigate the complex process of debt collection and ensure that you are not taken advantage of.
Frequently Asked Questions
What happens when my debt is sold to a collection agency?
When your debt is sold, the new collection agency has the right to collect on the full balance. They may contact you for payment, and you should verify the debt’s legitimacy.
Can I still be sued if my debt is sold to another company?
Yes, the new owner of your debt can sue you if the debt is unpaid. However, they must follow the same legal process as the original creditor.
How can I verify if my debt has been sold?
You should receive written notice of the sale. You can also check with the original lender to confirm if the debt has been transferred to another party.
What are my rights under the Fair Debt Collection Practices Act (FDCPA)?
The FDCPA protects you from abusive, deceptive, or harassing practices by debt collectors. You can dispute the debt and request verification before any collection efforts continue.
Can I negotiate the amount I owe if my debt is sold?
Yes, you can negotiate with the new collector. Sometimes they may be willing to settle for a lower amount, but it’s important to get any agreement in writing.
What should I do if a debt collector contacts me about a debt I don’t recognize?
You can ask for written verification of the debt, including the amount owed and the name of the original creditor. Don’t make any payments until you’ve verified the information.
How does the sale of my debt impact my credit report?
The sale may lead to the debt being re-aged, potentially extending the time it stays on your credit report. This can negatively affect your credit score.
What steps can I take if I feel harassed by a debt collector?
You can send a cease and desist letter to stop further communication, and if the harassment continues, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) or consult an attorney.
