What Happens When Your Debt Has Been Sold

Today, we’re going to talk about what happens when your debt has been sold.

Hi, my name’s Mike Ziegler. I’m the managing attorney for the Debt Fighters. We’re a Florida law firm focused on helping consumers to eliminate serious debt. So first, can a debt be sold? 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. And it’s quite common when a loan is falling behind for it to be sold to a different company that specializes in collecting out old debts.

So there is a distinction between assigning the ownership right of the debt and just transferring the debt to a debt collector. So sometimes the debt stays with the original creditor, but there may be a new company that’s just collecting on behalf of the original creditor. And 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. Very common question that I receive is, “Hey Mike, 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. Particularly if they proceed to go on to wage or bank account garnishment.

What are the things to look for when a debt has been sold? Most importantly, you want to look for notice in writing, particularly in Florida, you’re required to get notice in writing of debt that has been assigned. And so 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. The other thing that you’ll want to check for verification is going to be your credit report. The 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.

So that can leave the delinquency, the damaging impact on your credit report for a longer window of time. So that’s something that you’ll want to review. What are your options when a company has sold your debt? So for the most part, your options when a debt is sold are nearly identical to the same 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 debt. So even though the debt may exist, there’s not anything they can do to collect on it.

In which case your best option may be to do nothing. And 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. So you can send the new debt owner a cease and desist letter found pretty easily through Google search, asking that you no longer receive communications with respect to the debt. And you can 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.

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