Recently heard of a church purchasing $3.3 million in resident debt for 15k and then cancelling all of it.
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Who says what somethings worth. If I want to sell you a huge gold ring 1$ why should you be forced to say no? I might want to sell low for some reason (It’s the one ring and the ring wraiths are coming). In the case of debt although the debt is “worth” 3.3 million you are never going to get 3.3 million dollars. Lets say 100,000$ of that debt is owed by a 91 year old with stage 4 cancer with basically no assets. If you manage to get 0.05$ on that 100k you will be doing very well. More over it will probably cost you over 1000$ to get that 0.05$; you are going to need to go to probate court when they offs it and present your case. So that 100k is literally worthless. There might also be a very poor person with 200K in debt. You might be able to get them to pay back 2K. If you go for more they will declare bankruptcy and get all the debt discharged, then you get nothing. All the debt in this 3.3 million pool will be like this.
My guess is that of that 3.3 million about 3% or 99,000$ is actually recoverable, and recovering it will take a lot of time and money. The people who hold the debt now are not debt recover specialist and as such probably could not recover any money. Therefor they sell it to someone who is, so they get at lest the 15K. The debt collector then spends maybe another 50K collecting the 99K for 34K in profits.
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