Eli5 how does buying debt work? And why can’t someone just purchase their own debt for a fraction of the cost then cancel it for themselves?

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I’ve seen stories of individuals buying up a bunch of debt for cents on the dollar then just forgiving it. Why can’t this been done on an individual scale?

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63 Answers

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Anonymous 0 Comments

Sometimes you can buy your own debt and cancel it for a fraction of the cost, it’s just called negotiating a lower amount to repay. Same cause and effect without the extra steps. Either way your credit score is going to be screwed.

Anonymous 0 Comments

It can be. You call the person who owns the debt and negotiate it down. Once it goes into collections it gets bundled and resold over and over. It’s cheaper for them for you to just pay a fraction.

Of course it won’t come off your credit report so keep that in mind.

Anonymous 0 Comments

It can be. You call the person who owns the debt and negotiate it down. Once it goes into collections it gets bundled and resold over and over. It’s cheaper for them for you to just pay a fraction.

Of course it won’t come off your credit report so keep that in mind.

Anonymous 0 Comments

Generally speaking there are two limiting factors, time and access.

The debt only becomes “cheaper” as it passes through multiple sets of collector hands, and generally only reduces in purchased cost with time. The closer the debt gets to being “expired” (almost all debts will fall off credit reports eventually, and become roughly meaningless), the harder it is to capitalize on it for a collector. For every dollar a collector spends trying to collect the debt they may only get one or two debts to pay out and the rest expire out. Higher risk, higher reward.

The second reason is that these debts aren’t listed as “John Doe SN 001-00-0001 $NonsenseAmount”, they are sold as blocks of debt, and they aren’t sold on an open market, it takes a great deal of time and resources to be able to access those markets. By the time a single individual managed to get the licensure and other accesses necessary to buy a block of debt they would generally have been better off just paying the debt itself.

A highly dedicated person, willing to take the time necessary to get the necessary access to the debt markets, research their specific debt, and manage to find said debt available on the market, could in theory buy it up for pennies on the dollar (or even less. A church just bought 3.3M USD worth of debt for less than 16000 USD and wrote it all of, at a rate of less than 0.003 per dollar of debt). In practice, it’s really difficult to find YOUR debt and get onto the market at the exact right time to buy it.

Anonymous 0 Comments

Generally speaking there are two limiting factors, time and access.

The debt only becomes “cheaper” as it passes through multiple sets of collector hands, and generally only reduces in purchased cost with time. The closer the debt gets to being “expired” (almost all debts will fall off credit reports eventually, and become roughly meaningless), the harder it is to capitalize on it for a collector. For every dollar a collector spends trying to collect the debt they may only get one or two debts to pay out and the rest expire out. Higher risk, higher reward.

The second reason is that these debts aren’t listed as “John Doe SN 001-00-0001 $NonsenseAmount”, they are sold as blocks of debt, and they aren’t sold on an open market, it takes a great deal of time and resources to be able to access those markets. By the time a single individual managed to get the licensure and other accesses necessary to buy a block of debt they would generally have been better off just paying the debt itself.

A highly dedicated person, willing to take the time necessary to get the necessary access to the debt markets, research their specific debt, and manage to find said debt available on the market, could in theory buy it up for pennies on the dollar (or even less. A church just bought 3.3M USD worth of debt for less than 16000 USD and wrote it all of, at a rate of less than 0.003 per dollar of debt). In practice, it’s really difficult to find YOUR debt and get onto the market at the exact right time to buy it.

Anonymous 0 Comments

Sometimes you can buy your own debt and cancel it for a fraction of the cost, it’s just called negotiating a lower amount to repay. Same cause and effect without the extra steps. Either way your credit score is going to be screwed.

Anonymous 0 Comments

It can be. You call the person who owns the debt and negotiate it down. Once it goes into collections it gets bundled and resold over and over. It’s cheaper for them for you to just pay a fraction.

Of course it won’t come off your credit report so keep that in mind.

Anonymous 0 Comments

Generally speaking there are two limiting factors, time and access.

The debt only becomes “cheaper” as it passes through multiple sets of collector hands, and generally only reduces in purchased cost with time. The closer the debt gets to being “expired” (almost all debts will fall off credit reports eventually, and become roughly meaningless), the harder it is to capitalize on it for a collector. For every dollar a collector spends trying to collect the debt they may only get one or two debts to pay out and the rest expire out. Higher risk, higher reward.

The second reason is that these debts aren’t listed as “John Doe SN 001-00-0001 $NonsenseAmount”, they are sold as blocks of debt, and they aren’t sold on an open market, it takes a great deal of time and resources to be able to access those markets. By the time a single individual managed to get the licensure and other accesses necessary to buy a block of debt they would generally have been better off just paying the debt itself.

A highly dedicated person, willing to take the time necessary to get the necessary access to the debt markets, research their specific debt, and manage to find said debt available on the market, could in theory buy it up for pennies on the dollar (or even less. A church just bought 3.3M USD worth of debt for less than 16000 USD and wrote it all of, at a rate of less than 0.003 per dollar of debt). In practice, it’s really difficult to find YOUR debt and get onto the market at the exact right time to buy it.

Anonymous 0 Comments

If you owe me $10k, but you’re not making payments and I think you’ll never pay and have nothing I can possess to pay the debt I have a few options.

1 – just accept the loss

2 – negotiate a lower payment (basically what you’re asking about self cancellation)

3 – hire a thumb-breaker (collection agency) to try and force you to pay.

4 – Someone might think they can get money out of you and offer maybe $5k to me and take over the $10k debt. If they can get more than that, even if less than the total owed, they make money, and I’ve cut my loss.

The only reason people would take on debt just to cancel it would be out of kindness, or as part of a consolidated debt portfolio where individual bad debts are uneconomic to chase.

Anonymous 0 Comments

If you owe me $10k, but you’re not making payments and I think you’ll never pay and have nothing I can possess to pay the debt I have a few options.

1 – just accept the loss

2 – negotiate a lower payment (basically what you’re asking about self cancellation)

3 – hire a thumb-breaker (collection agency) to try and force you to pay.

4 – Someone might think they can get money out of you and offer maybe $5k to me and take over the $10k debt. If they can get more than that, even if less than the total owed, they make money, and I’ve cut my loss.

The only reason people would take on debt just to cancel it would be out of kindness, or as part of a consolidated debt portfolio where individual bad debts are uneconomic to chase.

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