how can a company purchase debt for less money than what the debt is worth?

Question

Recently heard of a church purchasing $3.3 million in resident debt for 15k and then cancelling all of it.

In: 9

Answer 1

Whomever held the debt basically wrote it off as unrecoverable — after a certain number of years, repeated attempts to collect, submission of derogatory marks to credit bureaus of late and non-payments, etc. they just write it off as a loss. Usually, such debt gets sold off to debt collectors who then try to collect more of the debt than they paid for it. Maybe in another scenario, that $3.3m in debt gets bought by a debt collector for $15k and then they hope to collect $30k or $45k from it by harassing the people in debt until some cough up some money. In thi