Why does your debt get sold on if in a IVA?

getdebtfree

Hey peeps

Just wondered why your debt gets sold on, then these debt collecting agencies start sending you letters demanding payment.

Mmmmmm they aint gonna get it because you are in a IVA do they not know this when the debt gets sold on to them??

Cheers guys

UpToMyNeckInIt

Hi,

The selling on of debts is big business.

Whilst I don't understand the line of thinking, some banks etc. feel it is better to sell-off 'bad debts' immediately (often at a much lower rate than your agreed dividend), rather than having them hanging around on their books.

Firms such as 'Max Recovery' (they have brought a few of mine), buy these debts at a vastly reduced cost, fully aware that they are included in an IVA. They do so on that basis that many IVA customers will achieve the dividend, or even exceed it because of windfalls, job promotion etc... So they may make back up to 100% of your original debt. Conversely these firms run the risk of a loss, if a customer fails the IVA, go BR etc.

Ultimately, they profit more than they lose of course.

These firms also seem to respect the IVA, so don't usually start chasing you for the full amount etc. So you shouldn't have some goon of a bailiff rolling up on your doorstep any time soon!!!

Maybe a forum expert can shed more light on this issue.

cheesedoffwithdebt

HI-I have a theory on this one. Companies get tax relief on bad debts written off, so in order to "prove" the write off, if they sell the debt on, it validates the tax relief claim.
The companies who then buy the debts, but them for pence I suspect, and can only win, particularly if there is an IVA as the IVA is a binding agreement so it has alot of security for a creditor.

If I were in the process of running a business I'd think seriously about taking on bad debts, I reckon it's quietly one of the most lucrative industries, well apart from Wonga :rotfl:

fermi

Some justifications here for selling debt, although being in an IVA does somewhat negate some of them. Still there are valid points that still apply.

http://www.csa-uk.com/media/editor/file/Fact%20sheet%20-%20debt%20purchase.pdf

Never been 100% convinced of the tax write off claim myself, but sure there must be a documented process out there regards it if there are additional tax benefits to selling on consumer debt.