Can I Buy My Own Debt?

You can’t buy your own debt in the hopes of saving yourself money or decreasing what you owe. However, you may be able to buy other peoples’ debts as an investment.

Buying your own debt for pennies on the dollar might seem like a great way to get out of debt fast. However, you can’t actually do this due to how debt buying works.

Debts of this nature are sold to debt collectors and other agencies in large bundles. Learn more about how debt buying works, why it’s not an answer to your debt concerns, and what you can do to handle debt instead below.

In This Piece

What Is a Debt Buyer and How Does Debt Buying Work?
Is It Possible to Buy Your Own Debt?
Why Are Debt Buyers Used?
How to Deal with Debt Buyers
How to Deal With Debt Buyers
Tips for Managing Your Debt
Buying Debt FAQ

What Is a Debt Buyer and How Does Debt Buying Work?

Debt buying occurs when creditors gather old debts—also sometimes called bad debts—into portfolios. They sell these portfolios of debts to debt buyers at a fraction of the original value of the debt.

For example, imagine a credit card company that has thousands of delinquent accounts. It may gather 1,000 old accounts that are 180 days or more past due. Say the average owed on each of these accounts is $1,000—that would be a total of $1,000,000 in old debt.

The credit card company might sell the debt at a fraction of that value, such as 15 cents on the dollar. In that case, the debt buyer would purchase the debt for $150,000.

Once the debt buyer purchases this portfolio of debt, they can either try to collect on the original debt or sell the debt. In many cases, the debt buyers go through the portfolio, keeping debts they think they can collect and selling off others in a similar method.

If the debt buyer is able to collect any of the debt, the money is theirs to keep. So, in the hypothetical example above, if the debt buyer collects $250,000 of the original $1,000,000 debt it purchased for $50,000, it makes a profit of $100,000.

Is It Possible to Buy Your Own Debt?

You can’t buy your own debt because no one sells individual debts. It doesn’t make business sense on either side to do so. Instead, debts are sold in huge portfolios that cover many accounts.

It would be difficult to discover what bundle of debt your debt would be placed in before the lender sells it off, never mind that you would likely pay more than your debt is worth to purchase both your debt and the debt of hundreds of other people.

For the creditor, selling old or uncollected debt is a way to write things off the books while getting at least some payment. Buying a large portfolio of debt at pennies on the dollar is a conservative gamble for the debt buyer. Debt buyers hope that by investing in many accounts, they’re able to collect money on some of them.

Why Are Debt Buyers Used?

The reason original creditors use debt buyers is that at some point, they consider debt uncollectible. They don’t want to spend any more of their own resources trying to collect on the debt. They could simply write the debt off and be done with it, but if they sell the debt to a debt buyer, they’re able to recoup at least some of their losses.

Many common types of debt can be sold to debt buyers. These include but aren’t limited to:

Credit card debts
Medical debts
Unpaid utility bills
Debts related to auto loans or mortgages

How to Deal With Debt Buyers

Because you can’t buy your own debt, someone else might. Here are some things you can do to deal with debt buyers if they end up holding your old debts:

Make sure it isn’t a zombie debt. These are debts that have already aged out of the statute of limitations for collection. However, they’ve risen to the top of a debt buyer’s or collector’s books, and someone is trying to resurrect them.
Negotiate to settle the debt. Debt buyers don’t buy your debt for full price, so they don’t have to collect the full amount to make a profit. They’re often motivated to settle at less than the amount owed if you could pay them immediately.
Stand up for your rights. Your rights as a consumer are protected under federal and state laws. Make sure you understand your rights so you can assert them when dealing with debt buyers and collectors.

Tips for Managing Your Debt

Managing your debt responsibly and proactively can help you avoid debt buyers altogether because you never let your debts get so delinquent they might be sold. Some things you can do to manage your debt include:

Creating and sticking to a budget. When you’re spending within your means and making debt decisions that work with your budget, you’re less likely to fall behind on payments.
Pay all your debts on time. Use tools such as debt management apps to reduce the chance of forgetting or losing track of a debt.
Being proactive with debts. If you find yourself in a position where it’s impossible to keep up with a debt, such as temporarily unemployed or dealing with a medical crisis, reach out to the creditor immediately. Many creditors have programs and options to help you deal with this type of issue. You may also be able to enroll in a debt management plan to help you repay what you owe over time.
Know what’s on your credit report. Keep up with your credit report so you don’t end up with old debt you thought was paid off coming back to haunt you.

Buying Debt FAQ

Is Buying Debt a Good Investment?

Buying debt can be a good investment in some instances since buyers are purchasing multiple debt accounts for pennies on the dollar. If at least a few accounts are repaid, the buyers will make a profit. But there’s always a chance that the debt holder won’t repay their debt.

Is It Legal to Buy Debt in the U.S.?

It is legal to buy debt in the U.S. as long as the buyer follows the rules. These rules include responding to debt disputes in a timely manner, not threatening to sue debt holders without cause, ensuring collections fall within the statute of limitations, and other similar provisions.

Can You Buy Your Own Debt?

Unfortunately, you can’t buy your own debt. If you’re trying to get out of debt, you may want to look at other ways to settle your debt. This could involve debt consolidation loans, balance transfers, negotiations, credit card debt forgiveness, and other similar methods. These methods can help you get out of debt and make avoiding debt collectors easier.

What Do You Call a Company That Buys Debt?

Individuals and companies who buy debt are typically called “debt buyers.” These companies take on the burden of trying to collect delinquent debt from individuals and businesses.

Take Control of Your Debt

Though you can’t buy your debt to settle what you owe at a fraction of the price, there are things you can do to get your finances back on track. Contact your lenders and creditors to see if they’re open to a debt repayment or settlement plan.

And check out our debt management guide to help you manage your debt now and in the future.