Selling debt gives creditors a fast way to manage their books. When you sell delinquent accounts or unpaid loans, you get cash right away. This helps lower your costs and lets your team focus on new business instead of chasing old bills.

Strategic debt sales also lower risk. Collecting debt in-house can lead to mistakes or legal issues. By selling to a trusted buyer, you transfer that risk. This converts non-performing assets into cash you can use today.

Working with an expert advisory firm makes this process safe and simple. It helps businesses manage risk and keep their cash flow steady in a changing market.

You need to spot risks, including compliance risk, before they happen. This means checking if the buyer follows the rules and treats customers fairly. A deep review ensures the sale matches your company's goals.

I. Checking Your Documents

• The Media Sample: Before closing, review a 10% sample of original contracts and statements. This proves the debt is real and ready for sale.
• Original Contracts: Confirm you can find the original credit application or digital signature. Without the contract, you cannot collect.
• Statement History: Check the timeline between the last payment and charge-off. Gaps in statements can cause issues later.

II. Cleaning the Data

• Military Review (SCRA): Active duty soldiers have special protections. You must screen for this to avoid breaking federal law.
• Bankruptcy & Deceased Scrub: Remove accounts that are bankrupt or deceased. This ensures you are selling collectable debt, which raises the price.
• Time Limits (SOL): Check the "Statute of Limitations" for each state. Knowing if a debt is too old to sue on is critical for pricing and compliance.

A clear Chain of Title protects your reputation and the buyer's money. You must track ownership from start to finish.

I. Tracking the History

• Unbroken Chain: You need documents linking the debt from the first lender all the way to you.
• Finding Gaps: If the debt was sold before, you need every Bill of Sale. One missing link makes the debt worthless in court.
• Name Changes: If your bank changed names or merged, include the official certificates. This connects the old name on the contract to the new name on the Bill of Sale.

II. The Bill of Sale

• Specific List: The sale document must list the exact files or account numbers being sold. Vague language does not hold up legally.
• Proper Signatures: Ensure the document is signed by an officer who has the authority to sell assets.

Forward flow agreements let you sell debt every month to the same buyer. This creates a recurring process that keeps your books clean and cash coming in.

I. Steady Structure

• Locked Criteria: We define exactly what "Qualified Accounts" look like (e.g., credit score range). This means the buyer gets consistent quality, and you get a consistent price without negotiating every month.
• Volume Limits: Setting a cap on volume lets you grow your lending without worrying about getting stuck with bad debt.

II. Managing Risk

• The "Kick-Out" Period: A 20-day window where the buyer can return bad accounts (like fraud) before paying.
• Price Reviews: Agreements should be reviewed every 6 months to adjust pricing based on how well the debt performs.

Lenders work with brokers to find the right buyers. A good broker helps you avoid mistakes and find safe, compliant partners.

I. Improving the Portfolio

• Remove Bad Accounts: Take out bankruptcies and fraud claims before you sell. A "clean" file sells for a higher price because it has less risk.
• Standard Data: Change your internal codes into standard industry formats. This makes it easier for buyers to review your file and bid quickly.

II. Segmentation for Profit

• Fresh vs. Aged: Sell "Fresh" charge-offs (newly defaulted) separately from older debt. They are worth more, and mixing them lowers your total price.
• Location Strategy: For big portfolios, group accounts by state. This lets buyers bid higher on states where they are strong.