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Can a charged-off account purchased by junk debt buyer be sold back to initial creditor to file lawsuit & collect?

Stanford, CA |

If a junk debt buyer is unable to collect on a charged-off account they purchased from a creditor, can that account then be sold or transferred back to the initial creditor they bought it from, and have the initial creditor sue and collect the money? Can a collection agency that was assigned by the initial creditor to collect, do this? Or is it not legal in the case of a charge off. Trying to get a better understanding of the process. Thanks in advance for any help

Attorney Answers 4

Posted

You wrote, "Can a charged-off account purchased by junk debt buyer be sold back to initial creditor to file lawsuit & collect?

A: Yes.

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Asker

Posted

Have you ever seen this happen in your experience?

Gary D. Bollinger

Gary D. Bollinger

Posted

No.

Posted

Conceivably, yes, that could happen, but practically it never happens, except if the debt buyer believes that the account was not properly classified when sold by the creditor.

Debt buyers normally sue in their own name, though sometimes if the named plaintiff is the original creditor, it can be a challenge to know if the debt had been purchased by a debt buyer or not. The process is explained in the articles on my website, which is linked below.

Robert Stempler (please see DISCLAIMER below)
www.StopCollectionLawsuits.com
www.facebook.com/SoCalConsumerLawyer
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NOTICE: The above statements are provided for general information purposes only and are not intended as legal advice or advice of any sort for a specific case or legal matter. If you do not have a signed attorney-client fee agreement with the Consumer Law Office of Robert Stempler, APC ("the Firm"), then until such written fee agreement is provided and signed by both a prospective client and attorney for a particular case, neither Mr. Stempler nor the Firm will represent you nor will they be your attorney in any matter and you remain responsible for retaining your own attorney and for compliance with any and all deadlines and for any statutes of limitations that may pertain to potential claims. Comments made on a public forum, such as Avvo.com, to not have any confidentiality because others may read them. If you desire a private consultation with Mr. Stempler that is confidential, please go to www.StopCollectionLawsuits.com and submit a free eCase Review. The result portrayed for a client was dependent on the facts of that case. Results will differ if based on different facts. The Firm and Mr. Stempler are a debt relief agency. The Firm and Mr. Stempler help people file for bankruptcy relief under the Bankruptcy Code.

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Posted

Would the initial creditor be able to tell you who specifically purchased the debt? or specify if said debt was purchased by a collection agency or debt buyer. Does it matter as far as what contractual rights they were transferred from the initial creditor in the sale of the debt, to collect it? I will check out your website too

Robert Harlan Stempler

Robert Harlan Stempler

Posted

Sometimes yes, sometimes no. They may disclose this, though it is also possible that they don't know what company owns it now, if it was resold to yet another debt buyer. It certainly matters what rights have been transferred from the creditor and if any have not been transferred. (Please see DISCLAIMER above).

Asker

Posted

How would you go about finding out what rights were transferred from the creditor, if any, in the sale of the debt? Is there a specific document that shows this? Also, how would you know if a collector is a collection agency hired by the creditor employed by them, or an outside debt buyer who purchased the debt?

Robert Harlan Stempler

Robert Harlan Stempler

Posted

You may need to ask them of they own the debt or if they are representing the creditor. The transfer document is known as a receivables purchase agreement, though it may have a variety of titles. There are other documents related to the agreement, such as the assignment and a bill of sale. (Please see DISCLAIMER above.)

Posted

"Charge off" is an accounting term used by creditors for their own tax reporting purposes. It has nothing to do with your obligation to pay the debt. The account can be transferred back and forth, and other debt collectors without affecting the validity of the debt. The only issue that would arise in a lawsuit is proof that the plaintiff in the lawsuit actually owns the debt.

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Posted

Does charged-off mean the original contract you signed with the creditor is null and void? since the account is cancelled and no longer valid. Wouldn't the contract & terms and conditions be canceled and invalid too? along with. How would you know if the creditor transferred all rights of your former charged-off account, including rights to collect and right to sue for the full amount, to the new debt collector? or if any were transferred at all

Richard Scott Lysle

Richard Scott Lysle

Posted

"Charge off" does not mean that the account is canceled. Your obligation to pay is still valid, subject to any other defenses that you have.

Asker

Posted

I meant cancelled with the initial creditor. Since at the point an account is charged-off it's no longer active. As in, can be used by you to make new purchases since it's cancelled. And since the account is no longer active after a charge-off, the creditor cancelled it and made it unavailable to you, wouldn't the contract you signed be cancelled and no longer active too? null & void. As the account is. Since when you call the creditor after a charge-off they tell you this account is cancelled no longer active. Does that also apply for the contract you signed as well? What if no rights or contract was transferred in the sale of the debt? Say if the debt buyer just purchased it in bulk with basic account information on a spreadsheet-no contract granting them specific rights or documentation proving you owe them money

Posted

A "charge off" is an accounting and tax principle, which allows a creditor to "ride off" or take a tax "break" on debt they consider to be irrecoverable. It doesn't mean you still owe the money. And it doesn't mean they can't still try to collect if they think, down the road, and before the statute of limitations expires, that its worthwhile pursuing.

As far as the sale from the original creditor to a junk debt buyer: if there is an adequate chain of title, i.e., legal proof that the debt was bought and sold by the various entities, then the original creditor can still sue you. Make them prove in court that A sold to B, and then B sold back to A. If they can't prove that, they will lose.

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Donny Emil Brand

Donny Emil Brand

Posted

I meant to say, "It doesn't mean you don't owe the money." I.e., you still owe it.

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