If a debt is sold to another company do I have to pay? If you asking this question you are by no means alone. Plenty of people have been frantically typing this into Google or asking debt charities if they still have to pay.

But we will save you the trouble by revealing the answer and an explanation here.

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

In the UK, your debt may be sold to another company who specialises in collecting debts. In the event that this happens, you will now owe the money to the new company who bought your debt. You will still need to pay it off or find a debt solution.

Why Do Creditors Sell Debts to Other Companies?

Creditors will sell debts to other companies because they do not have the time or resources to chase the debt up. They sell the debt for a fraction of its value to debt collection businesses who will then chase you for the money by sending you letters.

These letters are likely to explain that they now own the debt and want payment or will take further action.

What Creditors Usually Sell Their Debts Owed?

All types of creditors may sell the debt owed to a debt collection agency. It is usually the case (but not exclusively) that companies without their own in-house debt chasing team will sell on the debt, such as utility providers. Financial institutions like banks or loan providers are less likely, but they may have a long-standing agreement with a debt collection industry who does it for them.

You should also know that sometimes the creditor doesn’t sell the debt to a debt collection business but only asks them to chase it for them. This means your original creditor still owns the debt but the collection agency chases it for a fee and/or for a commission once the debt is paid. 

This is why you might have a debt with a creditor that hasn’t been sold on but you hear from another company instead. This can be confusing and is why so many debtors think letters are scams when they are not. But they could be scams so always do your research. 

How Much Do They Sell the Debt for?

Creditors will sell debts to these companies for much less than their worth. Some will sell them for about 25% of their value. The sell-on price is much lower because the debt collection company cannot be certain that they will be able to get the money from you (for many reasons). Ultimately, the debt collection company takes a small gamble by buying the debt, hoping to make a profit in the end.

If They Sell for Less, Do I Pay Less?

You might be hoping that if a creditor sells your debt on 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.

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 on 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 I Was 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 that 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.  

What If I Was 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. You should be able to speak to your insolvency practitioner to understand the situation further, but the terms of the agreement should remain exactly the same.

What If I 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.

Where Can I Get Debt Solution Help?

You can find the best debt solution for you by speaking with UK debt charities. These groups can offer free debt advice to help you understand the situation and what your next move should be. They can also explain your rights when being chased for debt.

Some debt charities offer debt solutions themselves, but you might need the help of an insolvency practitioner at a debt management company. These groups can offer paid-for debt solutions that can help you get out of debt and maybe save money in the long run. 

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
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