What if your credit card debt with a creditors gets sold to a collection agency?

[inhocknow]

Hello folks, thanks for all of your great and fantastic help.
If Wachovia sells your credit card debt to a collection agency right before you file for BK, I know that your debt is discharged regardles of who owns it. Does this mean that the collection agency just lost its investment? Does the collection agency get reimbursed from the original creditor? Thanks for your help.

[HHM]

Not that it really matters in the grand scheme of things...but

You have distinguish Debt Buyers from pure Collection Agencies.

A Collection Agency does not purchase the debt from a creditor. A creditor merely places an account with the CA and the CA only earns money if they can collect from the debtor. The CA works on contingency.

A Debt Buyer will actually purchase the debt from a creditor at a discount. The debt generally is not purchases individually...your debt is part of a package that is specifically created with certain criteria, and is graded (A, B, C, etc). Sometimes there can be a BK contingency where the Buyer gets a refund, but that is only if the debt does not meet the creteria of the package, but usually, to answer your question, if the debtor goes BK, the Debt buyer loses the amount they paid for the debt. (However, when that happens, what they do is adjust their collection criteria for the remaining debt in the package.).