If you believe that when you declare bankruptcy, the bank suffers a complete loss, you are mistaken. In reality, the moment your bankruptcy case enters the courtroom, the banks instantly profit.
Consumer lenders and credit card companies often sell customers’ credit card accounts to debt buyers. This isn’t a surprise, or it shouldn’t be a surprise. At the point of charge-off, when the creditor transfers the amount owed for accounting purposes from one column to another, the debt is frequently sold. Most individuals, however, are unaware that some of these obligations aren’t sold until after you declare bankruptcy. Yes, ownership changes the instant your bankruptcy petition is filed.
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This is an outright sale of accounts made possible by contracts that, in some cases, date back more than ten years. Future flow agreements (often referred to as “forward flow agreements” as well) are contracts that are used to negotiate these transactions years in advance, whether they include charged-off accounts or those that are related to consumer bankruptcy proceedings. Only a small number of top-level firm personnel normally have access to these agreements, and no one else.
Why? Considering that the creditors do not want you to be aware of how much money they receive from your bankruptcy filing. The debt buyer may offer you as little as $0.07 on each dollar or as much as $0.25 on each dollar, depending on the type of bankruptcy case you file.
Due to the fact that you will be establishing a court-ordered payment schedule once you file for Chapter 13 bankruptcy, selling debt makes some sense. The debt buyer is ready to accept some risk that your case falters since the creditor needs to be paid right now. However, there are also future flow arrangements in place for Chapter 7 debt. In reality, in well over 95% of all Chapter 7 cases, there is no asset liquidation that results in payments to creditors.
What might possibly motivate someone to sign a future flow agreement to buy Chapter 7 debt?
- Do the debt collectors hold onto the bills long enough to start pursuing you after your Chapter 7 bankruptcy has been discharged?
- Because they continue to appear as due and overdue on their credit score, do the individuals actually pay these discharged debts?
- Do debt purchasers resell accounts to other businesses, some of which may or may not even be aware of the bankruptcy case, in order to recover their losses?
- When a customer pays a credit card issuer for an account that has already been offered through a future sale, do they receive a commission?