Recently heard of a church purchasing $3.3 million in resident debt for 15k and then cancelling all of it.
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As an addendum to all this, if you want to evaluate the good that the church did from cancelling the debt, the purchase price is what’s important, not the nominal amount of debt. The vast majority of that debt was never going to be paid, and even when the church cancels it, the credit rating agencies still record that the person did not pay their debt. For the people who weren’t going to pay either way, the cancellation doesn’t change their lives much.
The collections agency was willing to sell all that debt for $15k, which means they didn’t anticipate collecting much more than that. So that means the cancellation prevented somewhere in the neighborhood of $30k in debt payments, depending on how much of their own time the collections agency was considering investing in harassing the debtors. The main benefit in the arrangement made by the church is that nobody spends ~$15k on people making phone calls to debtors. This is certainly not a productive activity and, if anything, is actively harmful to society and the people who live in it.
As an addendum to all this, if you want to evaluate the good that the church did from cancelling the debt, the purchase price is what’s important, not the nominal amount of debt. The vast majority of that debt was never going to be paid, and even when the church cancels it, the credit rating agencies still record that the person did not pay their debt. For the people who weren’t going to pay either way, the cancellation doesn’t change their lives much.
The collections agency was willing to sell all that debt for $15k, which means they didn’t anticipate collecting much more than that. So that means the cancellation prevented somewhere in the neighborhood of $30k in debt payments, depending on how much of their own time the collections agency was considering investing in harassing the debtors. The main benefit in the arrangement made by the church is that nobody spends ~$15k on people making phone calls to debtors. This is certainly not a productive activity and, if anything, is actively harmful to society and the people who live in it.
As an addendum to all this, if you want to evaluate the good that the church did from cancelling the debt, the purchase price is what’s important, not the nominal amount of debt. The vast majority of that debt was never going to be paid, and even when the church cancels it, the credit rating agencies still record that the person did not pay their debt. For the people who weren’t going to pay either way, the cancellation doesn’t change their lives much.
The collections agency was willing to sell all that debt for $15k, which means they didn’t anticipate collecting much more than that. So that means the cancellation prevented somewhere in the neighborhood of $30k in debt payments, depending on how much of their own time the collections agency was considering investing in harassing the debtors. The main benefit in the arrangement made by the church is that nobody spends ~$15k on people making phone calls to debtors. This is certainly not a productive activity and, if anything, is actively harmful to society and the people who live in it.
Like any commodity, it’s worth what someone is willing to pay for it.
If you owe the bank $10m and can’t make any payments at all, interest is causing the amount owed to go up and up and up – well, it’s getting worse but no matter how bad it gets, the bank is still ending up with nothing.
If they can sell the debt even for cents on the dollar, they recoup *something*. They’ll do this if they conclude that getting something is better than nothing and making the debt someone else’s problem.
Like any commodity, it’s worth what someone is willing to pay for it.
If you owe the bank $10m and can’t make any payments at all, interest is causing the amount owed to go up and up and up – well, it’s getting worse but no matter how bad it gets, the bank is still ending up with nothing.
If they can sell the debt even for cents on the dollar, they recoup *something*. They’ll do this if they conclude that getting something is better than nothing and making the debt someone else’s problem.
Like any commodity, it’s worth what someone is willing to pay for it.
If you owe the bank $10m and can’t make any payments at all, interest is causing the amount owed to go up and up and up – well, it’s getting worse but no matter how bad it gets, the bank is still ending up with nothing.
If they can sell the debt even for cents on the dollar, they recoup *something*. They’ll do this if they conclude that getting something is better than nothing and making the debt someone else’s problem.
Banks are usually the original debt owners. You borrow money and pay it back to the bank. If you aren’t paying it back, then what the bank can do is sell off your debt to the highest bidder for a reduced price to a collection agency or another bank. The new owner will then try to get you to pay up. The original bank gets what it thinks is a good deal by guaranteeing a fraction of the money, and the new owners make their living by trying to collect more of the debt than they paid for it.
Banks are usually the original debt owners. You borrow money and pay it back to the bank. If you aren’t paying it back, then what the bank can do is sell off your debt to the highest bidder for a reduced price to a collection agency or another bank. The new owner will then try to get you to pay up. The original bank gets what it thinks is a good deal by guaranteeing a fraction of the money, and the new owners make their living by trying to collect more of the debt than they paid for it.
Banks are usually the original debt owners. You borrow money and pay it back to the bank. If you aren’t paying it back, then what the bank can do is sell off your debt to the highest bidder for a reduced price to a collection agency or another bank. The new owner will then try to get you to pay up. The original bank gets what it thinks is a good deal by guaranteeing a fraction of the money, and the new owners make their living by trying to collect more of the debt than they paid for it.
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