6 important things to know about selling bankruptcy claims

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Selling a bankruptcy claim has several benefits that can help a claimant get back on their feet quickly. A direct sale allows a creditor to receive a lump sum payment, with little fuss and no waiting. Bartering can take months or years before a deal is completed, so it’s easy to see the benefit in selling the claim outright instead.
However, there are details involved in selling a claim that needs to be considered by both parties before they begin negotiations. As with any contract negotiation, sellers should be aware of the pitfalls that may arise if they don’t fully understand each part of the agreement being discussed. Here are six important points that every debtor should know about selling a bankruptcy claim to a trade buyer.
You can’t choose who buys your claim
When a debtor decides to sell a bankruptcy claim, they must rely on the help of a qualified intermediary (QI). A QI is a third party that assists a debtor in selling their claim in negotiating with a buyer. Unfortunately, a QI cannot choose what type of buyer they work with to purchase a claim.
If the debtor wants to sell the claim to a specific company, he or she must find another QI that specializes in matching buyers and sellers hoping for direct sales. Some public companies prefer this method over an auction. It gives them more control over who purchases their debt at a discounted rate.
The value of the claim will not change

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Trade buyers are not out to scam or hurt their clients when they purchase bankruptcy claims because it’s bad for business. However, It is important to follow a guide to selling a bankruptcy claim to trade buyers, so a claimant knows a trade buyer won’t offer a bad deal or fail to pay a claimant. When a bankruptcy claim is sold to a trade buyer, a debtor is required to sign a contract agreeing not to make any changes until the claim has been fully paid for.
This is often misunderstood by sellers who have heard horror stories involving trade buyers and fallout from other companies in their industry. Some brokers use scare tactics to intimidate claimants while others try to guilt people into selling their claim rights at a discounted rate. These methods are usually employed by inexperienced QI’s that don’t know how much each case may be worth.
Multiple bankruptcy claims may affect the claim amount
If a trade buyer purchases bankruptcy claims from more than one creditor, the claim amount shown in the contract may be reduced to cover any debts owed. This is because most buyers don’t want to take on additional liability when purchasing bankruptcy claims, so they will often adjust their offer based on what they are willing to pay for each case.
A trade buyer can ignore claims that have been satisfied, but this is rare because buyers prefer to purchase claims in one lot. If the sale price of claims with balances is reduced, it doesn’t necessarily mean there will be less money paid for each claim being sold.
The claim must be active and not in dispute
When claiming bankruptcy, a debtor can have their claim placed on hold. If this happens, the debtor must inform any potential buyer about the status of the claim. If there are any disputes over how much money is owed, those issues should be resolved before selling a claim because that will affect what a buyer is willing to pay for a claim.
If there is any dispute or litigation, the claim must be active and not in the middle of arbitration so a trade buyer can purchase it.
Keep records of all correspondence with a trade buyer
It’s a good idea to maintain a record of all correspondence with a trade buyer regarding a bankruptcy claim. The letter of intent is a formal agreement that will be presented to a claimant before a final contract is signed. A copy of this document should be kept along with any other personal information about the claimant listed on it, such as email addresses, phone numbers, or a social security number.
This is a safety measure that should be taken to ensure a claimant doesn’t fall victim to a scam and their data isn’t sold to a third party without consent. It’s also a good idea because trade buyers may ask for a copy of a claimant’s driver’s license to verify a claimant’s identification.
The process will be painful
The process of selling bankruptcy claims can be tedious and frustrating for claimants who are not used to dealing with trade buyers. It’s a good idea to prepare oneself before meeting with a buyer or signing any contracts. Taking some time before reaching out to a trade buyer will be beneficial because it gives the claimant enough time to speak with an attorney and receive the right guidance. This is especially true if a claimant doesn’t know what to expect from selling bankruptcy claims or they have never done this before.
The process of selling bankruptcy claims can be both rewarding and scary. It is also, however, an excellent way for debtors to receive fast cash, especially if multiple claims can be sold. Being prepared and knowing what to expect will go a long way when dealing with trade buyers.