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What do creditors get for chargoffs (bad debt)?

Discussion in 'The Okie Corral' started by jpa, Jan 11, 2010.

  1. jpa

    jpa CLM

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    I'm curious to know, how much creditors (credit card companies, mortgage companies, etc) get paid by the collection agencies when they sell the bad debt? Does it vary by the type of debt or is there a general rule of thumb they use when deciding what to pay? I've heard it can go as low as 10% but can be as high as 60% depending on how "collectable" it is.

    The reason I ask is because my mom has a 2nd mortgage on her house. She's worked out a modification on the first mortgage (final next month) but still has a $50k outstanding 2nd. Considering both balances, her house is currently $120k under water. The lawyer for the bank :wow: said they're pretty much treating the second as uncollectable bad debt and it will be sold to a collection agency for a percentage of the balance. They will then try to collect more than they paid for it to try to turn a profit. She hasn't been contacted yet, but I'm trying to get an idea of a baseline to start offering a payoff. If a reasonable amount can't be negotiated, she will probably wind up filing bankruptcy.

    Thanks in advance for any information. Thread-crappers and those who want to call names and pass judgment with stuff like "pay your bills", "don't buy what you can't afford" and "don't be a deadbeat" kindly click the back button instead of reply. Thanks and buh-bye.
     
  2. saluki9

    saluki9

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    Its hard to say. It could be sold for less than $.10 on the dollar because many of them are. The important piece being that they are packaged before being sold, so it's not as though it is one price being paid for just her debt.
     

  3. ssgrock3

    ssgrock3

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    they can sell it off to the collectors, but for pennies on the dollar as said above.
     
  4. 220-9er

    220-9er

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    I would pay an attorney to look the contract over to see what her options are now that the first has changed and find out what her options are.
     
  5. Ender

    Ender ComfortablyNumb

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    From credit card companies??? probably sold for pennies on the dollar.

    Most of the places I've worked with say they pay ~30% of whatever is collected...so it isn't 'sold,' really, it is....transferred, payable on commission and such...
     
  6. jpa

    jpa CLM

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    Every atty wants to do a bankruptcy and be done with it. She's trying to avoid that because outside of the second mortgage, her credit isn't half-bad. She can't come up with a $50k downstroke at the drop of a hat to pay it off in full, but we can come up with $5k if the offer is there. That and it's an adjustable loan at 11%, set to reset next year.