What Happens When They Sell Your Debt?

When debts remain unpaid and companies have exhausted their in-house debt collection procedures, creditors can sell customers' old debt to companies that specialize in debt collection.

Selling Debt

• When creditors have made numerous efforts to contact a debtor and fail to reach a satisfactory conclusion to the outstanding debt, they often find it more cost-effective to sell their debt on to a debt collection agency. They will sell the debt for a percentage of what you owe them, and the debt collection agency will try to collect the full amount from you, making their profit the value of the difference. For example, if you owed $1,000, creditors might sell the debt for 40 percent and recoup $400, which is better than the zero amount they were getting from you. The collection agency will then try and collect $1,000, plus additional fees and service charges from you. If they are successful, they will earn $600 plus fees.

Collection Agencies

• Collection agencies will continue to add interest and fees to the debt you owe. These can add up significantly and soon the debt is far greater than it was originally. You may find that these agencies try to garnish your wages to recoup the money. Additionally, agencies will make negative reports to your credit report, which will affect you adversely in any future financial transactions you try to make.

Time Frame

• Each state sets out regulations for debt collection. Companies have between two to 15 years to pursue debt. While your debt will eventually go away, you will have accrued negative reports on your credit report, which will be difficult to repair. Even though the statute of limitations may have expired, a debt collection agency can still file a civil suit in court. While you can ask the judge to dismiss the suit on the grounds that the statute of limitations has expired, dismissal is not guaranteed.