So here’s a thought. I’ve been in debt before and dealt with collection agencies, and I know that a lot of times, these debts are sold for way less than their actual value.
What if someone created a debt-buying company to try and buy back their own debt at a huge discount from the current debt owner?
I mentioned making money because I think they might want to sell a bundle of debt accounts, which could cost a few thousand. But if your debt is over $10k, it might still work out in your favor. Plus, if you bought a portfolio, you’d have other people’s debts too, which you could collect on, technically speaking.
Then, you’d own your own debt – and who’s going to sue themselves, right?
I think the problem is that most big creditors have contracts with established collection agencies, so they probably wouldn’t sell to a new, small company.
Wynn said:
I think the problem is that most big creditors have contracts with established collection agencies, so they probably wouldn’t sell to a new, small company.
Good point. What made me wonder is that I’m a property manager for six commercial buildings, and I’ve been seeing more small collection agencies pop up lately. They must be getting their debt accounts from somewhere, so maybe this idea is possible after the debt’s been passed down a few times.
Since you’re a property manager, could you pitch this as a side business to your company? Maybe hire someone experienced in collections and give them a percentage of what they collect.
Edit: Meant to reply to your other comment, but you get the idea.
@Wynn
Thanks, that’s actually a great idea. I’ll bring it up tomorrow and see if they’re open to it. I’ve noticed that these collection agencies have a high turnover, so maybe they’d be interested in subcontracting someone. They often have boards showing the collection amounts, so they’re really focused on numbers.
If anyone wants an update, I’ll be happy to share how it goes.
Creditors usually don’t sell debt until it’s gone through a collection agency, so it’s harder to collect at that point. Plus, there’s a lot of legal stuff to navigate if you want to do it right.
Gray said:
Out of curiosity, how many of your money-making schemes have worked out?
Haha, I’m not really thinking of this as a get-rich-quick thing. I’m just curious if someone could technically “own” their own debt as a way to settle it. Debt collectors often buy debts for a small fraction of their value. You might be able to buy your debt, along with a few others, for cheaper than what you owe.
You probably couldn’t buy just your account, but you could buy a batch that includes yours. Since these debts are cheap to buy, you could end up paying less than what you owe overall.
@Gray
Not really, to be honest. Someone mentioned the legal side earlier, and that’s definitely a barrier.
If you bought your own debt and settled it for less, you’d still need to file a tax form and report the difference as income.
So yeah, while it might feel like “free” money, you’re technically paying what the market says the debt is worth. Of course, there are moral questions about honoring the original agreement too.
And as for get-rich-quick schemes, I don’t think they work. The best way to build wealth is probably owning a successful business.