Does a Collection Agency Ever Sell a Debt Back?

When a person takes out a debt, he signs a contract that obligates him to pay back the debt under specific terms, such as at a particular rate of interest. This contract functions very much like any other debt obligation, such as a bond. In fact, this debt can be treated as a financial security by the creditor, meaning it can be sold to other parties, such as collection agencies.

Selling Debt

When a company sells a debt a collection agency, the two parties sign a contract legitimizing the transfer of the debt from one party to the other. Unless the debt contract specifically forbids the debt from being sold from one party to another, this debt can be sold as many times as its owners wish. This means that a debt sold by a creditor could, theoretically, be bought back by him later.

Collection Agencies

Collection agencies sometimes work on commission for creditors but also often choose to buy debt outright. When this happens, the collection agencies will usually only have to pay a fraction of the price that the debt entitles them to, as their ability to collect on the debt may be uncertain. Sometimes, the collection agency, rather than attempt to collect on the debt, with resell the debt to another party.

Selling Debt To A Creditor

While it doesn't happen regularly, a creditor could seek to buy back his debt from the collection agency. This could happen if the creditor has received new information indicating there is a strong likelihood the person will make good on his debt in the future. However, in order to do this, the collection agency would have to be willing to sell the debt to the creditor.

Selling Debt to the Debtor

Sometimes, a debtor will attempt to get out of debt by purchasing his own debt from a collection agency. While sometimes a collection agency will simply wish to receive payment on the debt, either in part of in full, other times the agency will agree to allow the person to buy his debt outright. At this point, the debtor would be effectively absolved of the debt, as he would only owe the money to himself.