Knowing About Junk Debt Buyers
Junk debt buyers often play a role in the debt settlement or debt consolidation process.
These firms buy collections of delinquent accounts at discounted prices. The price they pay depends on how old a debt is and how many different collection companies have tried to collect it. The more people who have tried to collect funds from a debtor, the less a junk debt buyer pays. Most of the time, junk portfolios contain bad credit card debt. They can also contain bad car loans, telecommunications accounts and retail debt.
Newly charged-off accounts are the most lucrative junk and carry the highest price tags.
Bad accounts one or two collection agents failed to collect cost substantially less than the original amount. Debts that have outlasted their statute of limitation often sell for almost nothing. All this has significant implications for debt settlements.
Knowing that junk debt sells for so little, creditors and collection agencies often will agree to settle accounts for less than their balance as long as they receive more from debtors than they would get from junk debt buyers. Credit consolidation specialists understand this important leverage debtors have over their creditors and will use it to their clients’ advantage.
In many cases, debtors gain more than a concession on their balance; they also get to
avoid junk buyers. These companies often act aggressively to collect on debts so they can
placate their investors. In many cases, junk debt collectors vigorously pursue debtors in
ways that could push legal limits on their behavior. Debtors who do not know their rights
could end up paying a debt that is legally uncollectible. Junk buyers often take more
extreme measures to collect a debt than what most collection agencies do.
Often debtors agree to a debt settlement without understanding the resulting tax
implications of their move. Forgiven debt is taxable. This means that someone who has
settled for substantially less than their balance could find out they owe a tax bill to the IRS that they can’t pay. Although no one likes taxes, settlements will still be the preferred option for many people struggling with unmanageable debt.
For some people, the tax penalty associated with a settlement is enough to make them
consider alternatives such as consolidation. Debtors should consult with qualified financial professionals before making a move to resolve their debt to make sure they make the most appropriate decisions for their circumstances.
