4 ms·

If debt is trading at pennies on the dollar, and I owe someone 5k, what's stopping me from borrowing 50 or 100 bucks from a friend (if I dont have it) and buyin

by rm2889 10y ago

If debt is trading at pennies on the dollar, and I owe someone 5k, what's stopping me from borrowing 50 or 100 bucks from a friend (if I dont have it) and buying back my debt? Do you need to buy in bulk? Here's an idea - aggregate debt at pennies on the dollar and sell it back to the debtor at twice the amount it'll still be pennies on the dollar and you'll make a nice profit.

mcherm 10y ago
That's called "settling" the debt -- and debt collectors try it all the time. Quite often it does not work.
awesomerobot 10y ago
>Here's an idea - aggregate debt at pennies on the dollar and sell it back to the debtor at twice the amount it'll still be pennies on the dollar and you'll make a nice profit. That's essentially what a lot of debt collectors will accept. If you have debt in collection, sometimes you can offer them a lump sum instead of the whole amount and they'll take it because they're looking to simply profit. At that point it's likely your credit is already ruined though... which is a whole different topic to broach.
- k-mcgrady 10y ago
  >> "At that point it's likely your credit is already ruined though... which is a whole different topic to broach." In the UK at least getting passed to a debt collector should have no impact on your credit score. It's when they decide to go further and recoup it through court that you start to get hurt. This is my experience at least. It makes sense as I know many people who have been passed to debt collectors for debts they didn't owe so it would be a mess if that effected their credit.
  - jdmichal 10y ago
    It doesn't matter in the US either. What matters here is days late. Anything over 30 days gets noted under the credit line, and will stick around there for a couple years or so. Unsure what happens to the mark once the debt is settled.
    - awesomerobot 10y ago
      After it's passed to collections you can't do much, it's too late. A "couple years" is 7 years. The US credit industry is absurd.
Dwolb 10y ago
I believe you've just described debt collection. The collections agency starts offering you to settle your debt at the highest possible amount and slowly negotiates down. For any amount above $0 they receive from you is a marginal benefit for them. i.e. marginal benefit > marginal cost for any collection above $0 since buying their list of debtors is a sunk cost.

by rm2889 10y ago

mcherm 10y ago

That's called "settling" the debt -- and debt collectors try it all the time. Quite often it does not work.

awesomerobot 10y ago

>Here's an idea - aggregate debt at pennies on the dollar and sell it back to the debtor at twice the amount it'll still be pennies on the dollar and you'll make a nice profit. That's essentially what a lot of debt collectors will accept. If you have debt in collection, sometimes you can offer them a lump sum instead of the whole amount and they'll take it because they're looking to simply profit. At that point it's likely your credit is already ruined though... which is a whole different topic to broach.

k-mcgrady 10y ago
>> "At that point it's likely your credit is already ruined though... which is a whole different topic to broach." In the UK at least getting passed to a debt collector should have no impact on your credit score. It's when they decide to go further and recoup it through court that you start to get hurt. This is my experience at least. It makes sense as I know many people who have been passed to debt collectors for debts they didn't owe so it would be a mess if that effected their credit.
- jdmichal 10y ago
  It doesn't matter in the US either. What matters here is days late. Anything over 30 days gets noted under the credit line, and will stick around there for a couple years or so. Unsure what happens to the mark once the debt is settled.
  - awesomerobot 10y ago
    After it's passed to collections you can't do much, it's too late. A "couple years" is 7 years. The US credit industry is absurd.

Dwolb 10y ago

I believe you've just described debt collection. The collections agency starts offering you to settle your debt at the highest possible amount and slowly negotiates down. For any amount above $0 they receive from you is a marginal benefit for them. i.e. marginal benefit > marginal cost for any collection above $0 since buying their list of debtors is a sunk cost.