Debt – Buying and Selling Debts, Loans, & Judgments
We can help with negotiations, risk assessments, due diligence, purchase, sale, and assignment documents, and with ensuring that our client gets what is necessary to effectively sell and transfer or acquire a debt, loan, or judgment.
Put 25 years of negotiations, operations, and business law experience in your corner.
Debt and Obligation Sellers
Secured debts, unsecured debts, performing loans, non-performing loans, and judgments, and all rights thereunder can be sold and transferred by the creditor or lender to monetize the obligation and recover, in full, or more usually, in part, an investment of money or of other consideration proffered in exchange for the monies due, or a portion of monies recovered in a lawsuit.
A creditor may lack the funds or desire to pursue an owed payment, or it may not be worth the time & money, or he or she may have tried to collect & failed. An investor buys the obligation at a discount, making the effort worthwhile.
Example: Business owner is owed $500.00 for a service provided to customer. Customer does not pay. Business owner is now a creditor and can use a collection service or an attorney. The collection service fails and the attorney costs too much. So the creditor can now file a claim or pay an attorney- neither of which is worth his time or money- and he may not even collect anything. He sells the debt to Mr. Investor who, after due diligence, agrees that the money is owed. He buys the debt for $100.00 from the creditor. Now he has to collect as little as $200.00 to double his money. Even if that takes 2 years, that is a nice percentage ROI- especially if the investor is adept at keeping legal costs low. Certainly, he takes the risk that he collects nothing, or only his $100.00.
Or, the lender of a loan may need to get his/her principal returned, immediately.
The creditor or lender sells the debt and assigns the original contract, judgment, or loan documents and related loan security to the debt or loan buyer (a/k/a, the investor). The investor, if the transaction is handled properly, now steps into the shoes of the creditor and has the same rights as that original creditor.
If the debt or defaulted loan has already become a judgment, then the judgment-creditor can sell the judgment to a judgment-buyer, who gets all of the rights of the debt seller.
The document must be signed by the party having ownership of the legal rights to the payments, as evidenced by the document (s) that created the original obligation (and any assignments), and any state and/or county filings.
Debt and Obligation Buyers/Investors
An investor can buy a loan, debt, or judgment for its cash flow or for a profit upon collection. The price paid is a discount to what may be recoverable, in the investor’s judgment. Part of the price-discount to face value accounts for the costs of collection and the risk of nonrecovery (except in the case of a performing loan). So, the purchase price is a combination of the profit margin required by the investor, plus a calculation of the collection risks. Even if the loan is performing, a buyer should try to get more of an ROI by paying below face value for the right to receive payment of the debt or obligation. The quality of the loan and borrower will play a role in price.
An investor in a loan, debt, or judgment should conduct due diligence, including as to prior liens, and must be sure that there is no restriction on the creditor transferring the obligation.
The investor must be sure that the debt has not expired under its terms or under an applicable statute of limitations or that a debt is not uncollectable pursuant to a debtor’s bankruptcy discharge.
An assignment of a debt, loan, or judgment, and of any security documents, such as a mortgage, lien, or UCC statement, must be included in a transaction, if the obligation is secured. If the obligation is unsecured (for example, credit card or medical debt), an assignment document that assigns all rights and describes the debt as clearly and specifically as possible, in addition to the document(s) that created the unsecured obligation is needed (unsecured agreements and loans are secured by the liability of the party being sued and that party’s assets, if any, that are, or can be secured following a judgment).
All files about the background of the debtor or borrower and the original service provided or original loan extended or judgment secured should be included and assigned so that buyer can assess his or her rights, his or her likelihood of collection, decide on a collection strategy, and have all documents needed to foreclose and obtain a judgment (if the payment obligation is not already a judgment).
We can perform collection actions for certain consumer debts and all commercial debts once the debt or loan is purchased.
For clients selling or investing in a debt, loan, or judgment our services include risk assessments, negotiations, due diligence, legal counsel, investment insights, preparing of purchase, sale, and assignment documents, and ensuring that the client gets what is necessary for a complete and valid sale or investment.
These services are provided on an hourly-fee basis.
Put 25 years of negotiating skills, operations counsel, and business law experience across a multitude of legal areas and industries in your corner to defend against- or invest in- debts and obligations.