Buying Debt For Pennies On The Dollar: 3 Factors Used To Assess The Value Of Debt

12 March 2015
 Categories: Business, Articles

In total, American consumers owe a total of $11.74 trillion in debt. Although such figures may appear alarming, they are a debt collector's dream. The Federal Trade Commission (FTC) has recently released a report, which found that debt buyers shelled out an average of 4.0 cents per dollar of face value debt. This means that a debt worth $4,000 is purchased for only $160. Getting into the debt collection business is easy although there is a lot of competition. The key to succeeding is being able to properly assess the value of debt portfolios. Here are 3 factors that you need to be on the lookout for.

Age of Debt Portfolio vs. Statute of Limitations

Once a creditor has decided to sell of a debt, the creditor is responsible for building or creating a portfolio, which will provide information regarding the age of the debt. It is crucial that you do not take the details offered in the portfolio with only a grain of salt — every little detail matters when you are trying to decide whether a debt portfolio will be lucrative or not. First off, all debt portfolios are separated into 3 distinct categories that are based on their age, and the amount of collectors that have attempted to collect. 

Primary debts are anywhere from 0 to 12 months old. Secondary debts are approximately 12 to 24 months old, and tertiary debts are over 24 months old. Take a look at the amount of creditors that have already attempted to collect the debt. This information will be listed in the portfolio. 

The statute of limitations on debt will vary in each state, and based on the type of debt that is owed. In some states, the statute of limitation on credit card debt may be as long as 10 years. Before purchasing a debt portfolio, you want to click here and consider what the statute of limitations are in your state, and whether the likelihood of being able to recover the debt will be high.

Amount of Contact Information Present

In order to collect a debt, you need to be able to contact the debtor. Unfortunately, this is not as easy as it sounds. Many creditors were quick to lend out money before collecting all of the contact information that is necessary to find the debtors. You want to take a quick look through the debt portfolios in order to determine whether you will have sufficient leads to go on in order to determine who the debtors are, and how to contact them.

Keep in mind that many people change their cell phone numbers and addresses within the span of several months. Although the information may have been correct at the time that the portfolio was created, the details that you have on the debtors may be out-of-date and inaccurate. In short, consider the likelihood of being able to contact the debtors, as you may have to put in some extra elbow grease in digging that information up.

Likelihood of Bankruptcy Filings

Last but not least, you may want to assess and analyze the financial standing of the debtors. Did you know that a total of 936,795 Americans filed for bankruptcy in 2014 alone? Once the debtors have filed for bankruptcy, an automatic stay will be placed on their accounts. This means that neither you nor any collection agency will be able to attempt to collect any money from any debts that are owed from that point of time onwards. Creditors owed unsecured debts generally collect little to nothing once debtors have filed for bankruptcy. 

You need to consider the financial standing of the debtors, and how the debts that you are purchasing will affect their credit score. Once again, a little extra research is needed.


Although collecting debts can be extremely lucrative, it is a tough business to get into. There are many rules and regulations established regarding what you can and cannot do. For example, you cannot call before 8am or after 9pm any day of the week, and you definitely cannot call debtors on Sundays. Make sure that you familiarize yourself with all of these rules and regulations to prevent yourself from getting sued for misconduct before analyzing and scrutinizing the details of the debt portfolios that are offered. If you are willing to put in the time and effort, you just might strike gold in this industry.