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Can I Sell Debt That Is Owed To Me To a Debt Collection Agency?

18/09/2012 by Brian Talbot



Loaning out money can result in some very frustrating situations, especially if the person that owes is late with payment or just outright avoiding you. It can get to the point that you need to take some type of legal action against them in order to collect your funds. However, if they continue to avoid payment or just outright refuse to make payment, what options do you have?

When giving someone a personal loan, most people will not take the precaution of having some type of document signed, especially if they are lending to a friend or family member. Generally, you will take it on good faith that they will pay you as promised. When payments do not occur, it can cause some very uncomfortable situations and severely damage relationships. If the amount of money is small, sometimes it is best served to forget about the loan and take the lesson learned. If the amount of money is significant, you may need to take action.

Selling a personal loan off to a collection agency is unlikely to happen, especially if there is no written agreement in place. Even if there is a note, it would have to be done formally or it is unlikely to be recognized by a collection agency or court of law. If you were able to sell it off to a collection agency, the return would literally be pennies on the dollar. You would almost be better off working out some type of minimal payment over a longer period of time rather than selling the debt.

Your next course of legal action is to take them to small claims court. Again, if there is no document in place to support the loan, it may still be difficult to prove the debt even exists. It is for this reason that at the very least, a check should be written with a note of “personal loan” being made in the memo area of the check. This would at least prove to the courts that a loan was in fact made, as their signature on the check confirms the transaction.

The best bet may be to approach the debtor and try to work out some type of agreement. It is at this point that you can try to get some type of document created to work out payments. Work with them on the payment schedule, even if it is as little as £5 per month, as long as it is something. More importantly, get their name and signature on a document acknowledging the debt and the repayment of it. This way, if they default again, you will now have documentation the loan exists.

Your options are very limited when it comes to collecting personal loans. It is often hard to turn down a friend or family member when they are desperate and you may feel funny about having a document drawn up and signed, but if the amount of money is significant, you need to protect yourself or risk the default of the loan.



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