Charged off CC Debt

Something to remember when CC company or debt buyer is offering to "settle" your cc debt. At the time your cc company sells off your debt, the price begins to plummet. Here are examples of original debt values and the prices that were paid for them. Pennies on the dollar. VERY few pennies....


Source: Collections & Credit Risk Magazine, July 2009

AAAC purchased 747.8 million of debt for 22.1 million

Encore Capital Group purchased 1.3 billion in debt for 55.9 million

Portfolio Recovery Associates, Inc. purchased 961 million of debt for 52 million.

Looks like Portfolio Recovery may have purchased some of my debt for a little over nickel for each one dollar face value.

You know that just seems weird to me, buying bad debt. I know they buy it hoping to collect on people like us, but the way things are right now, I wonder will they actually recoup all that money. I hate to say this, but I hope not.

I know they buy it hoping to collect on people like us, but the way things are right now, I wonder will they actually recoup all that money. I hate to say this, but I hope not.

I think most people feel the same way as you. I hate to say it too, but I hope they lose on their investment.

If they are able to collect even 10% of it they make out quite well.

If they are able to collect even 10% of it they make out quite well.

If they buy $100,000 worth of debt for $5,000, they break even if they collect only 5% of the debt but if the debt is collecting interest, in one year's time, they might only have to collect 2.5% - 3% to break even. After 2 years the amount they would have to collect to break even is only 1.25% - 1.5%. Depending on the debt, it could even be less.

$100,000 debt after one year could have a potential, after considering interest, etc. of having a net worth of $200.000. After 2 years that might ballon to $400,000.

With 'clever' accounting, a person could collect 1% of the debt base of $400,000 which is $4,000. Sell the rest of the debt to some sap at 1% ($400,000 - $4,000) or 1% of 396,000 which is $3,960 so as to write off the lost of the debt purchased. Being 'clever', they would say they made $4,000 in collections and then made $3,960 in selling the debts and had to 'take a lost' of ($396,000 - $3,960) $392,040.

In the end, they make $7,960 on what cost them $5000 and then they take a tax write off of $392,040 on 'their lost' on top of that.

Sort of like figures can't lie, but liars can figure....

I wonder if the government backstop behind Citigroup's debt is smart enough to recognize this fact, or if they're dumb enough (or maybe it is a willful decision like AIG) for Citi to earn interest at 29.99% on their charged off balances, per the original contract ...

Inquiring minds, as they say...too bad we'll never know.

I wonder if the government backstop behind Citigroup's debt is smart enough to recognize this fact, or if they're dumb enough (or maybe it is a willful decision like AIG) for Citi to earn interest at 29.99% on their charged off balances, per the original contract ...

Inquiring minds, as they say...too bad we'll never know.



The IRS only has certain agents that handle only business situations. For me, it is almost impossble to get an answer from these people and if you do get an answer, if you speak to another agent it will be different.

Recently I had an issue with State tax. In order to resolve the issue, I went down and sat down with a tax agent. He was using a calculator and I was using a pencil. For some reason, he was consistently coming up with the wrong answers. Finally, I figured out what he was doing wrong and we finally got on the same page.