If a Debt Is Sold to Another Company Do I Have to Pay?

Are you wondering if you have to pay a debt that has been sold to another company? You’re in the right place for answers. Every month, over 170,000 people visit our website seeking advice on similar matters.

In this article, we’ll help you understand:

•  What happens when your debt is sold to another company
•  How this might affect your credit score
•  If you can pay less if your debt is sold for less
•  What to do if your creditor goes bust
•  How you can legally write off some of your debt

We’re here to guide you through this. Let’s take a step-by-step look at what happens when a debt is sold and what you can do next.

If a Debt Is Sold to Another Company, Do You Have to Pay (UK)?

In the UK, your debt may be sold to another company that specialises in collecting debts.

Debt transfer in UK is allowed providing the debt falls under the Consumer Credit Act.

If this happens, you will now owe the money to the new company that bought your debt. You will still need to pay it off or find a debt solution.

When can a debt be sold?

Debts regulated by the Consumer Credit Act can be sold to another company if you stop paying.

In short, a debt default could result in it being sold by an original creditor.

It applies to most types of consumer debt which include:

• Loans
• Overdrafts
• Credit cards
• Store cards
• Catalogue debts
• Hire purchase debts

Will you be told when a debt is sold?

You should be told when a debt is sold by an original creditor to a debt recovery company.

The buyer should also send you a debt transfer notification.

Plus, the new owner should write to let you know who they are and the amount you owe with reference details for easy identification.

If They Sell for Less, Do You Pay Less?

You might be hoping that if a creditor sells your debt for less than it is worth, the debt will be reduced and you don’t have to pay the whole amount back.

Unfortunately, that is not the case because a full repayment requirement is needed even when a debt is sold.

The debt is sold for less simply because it is the only way that any collection agency would buy it.

The collection business is trying to make a profit and is somewhat taking a risk by buying it, so they are not prepared to buy it for anywhere close to the debt’s real worth. 

Who Else Sells Debt to Other Companies?

It is not just creditors that sell their debts to debt collection businesses.

Sometimes debt collection businesses will sell debts on to other debt collection businesses.

This will usually happen if the business that currently owns the debt is struggling to locate you or is going bust and need to raise money.

What If You Were Already Paying the Debt with a DMP?

If you were already paying the debt off with a Debt Management Plan (DMP), it is unlikely that it would have been sold on.

However, in some cases, it does happen.

There is a chance the new company that owns your debt will stick to the agreement in place, but it is not guaranteed.

Because a DMP is an informal debt solution that doesn’t have any legal weight, the new owners of your debt are not obliged to stick with the repayment schedule.

They could ask for payment in full or you might have to agree on a new DMP with them.  

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What If You Were Using a Formal Debt Solution?

You might have been paying back the debt with a formal debt solution like an Individual Voluntary Arrangement (IVA).

If this is the case, the formal debt solution will continue.

I suggest you speak to your insolvency practitioner to understand the situation further, but the terms of the agreement should remain exactly the same.

What If You Had No Debt Repayment Agreement?

If you did not have a debt solution in place with the original owner of your debt and you have received threatening letters from the new owner, there are ways you can make the situation better.

Numerous debt solutions are available to help you avoid having to pay the debt back in one payment and simultaneously avoid any legal proceedings.

Thousands have already tackled their debt

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Will a sold debt affect your credit score?

When a creditor or debt collector sells your debt to another recovery company, it’s recorded on your credit file as a ‘default’.

The credit report implications would negatively impact your credit rating.

Even when you pay the debt off in full, it remains on your credit report for 6 years, thus impacting your credit score until it expires.

Do you have to pay a debt if a creditor goes bust?

Unfortunately, a debt is still payable even when a creditor or debt recovery company goes into administration.

Debt obligations after creditor bankruptcy remain.

In short, you’d still have to pay what you owe if the debt is yours and it’s not statute barred.

How do debt collectors contact you?

Debt collectors have the right to contact you by:

• Letter
• Phone
• Email
• Text
• In-person visit