Junk Debt Buyers vs. Original Creditors

If you’re facing lawsuits for debt, you’ll want to determine whether the debtor is the original creditor or a junk debt buyer. Some examples of types of debt you might face a lawsuit for include:

  • Credit card debt
  • Personal loans
  • Medical bills

So why does it matter whether the debt is from an original creditor or a junk debt buyer? We’ll explain the difference and some things to keep in mind. Regardless, filing for bankruptcy could stop calls about non-payment.

Original creditors explained

An original creditor is what it sounds like. This is the entity that originally provided you the loan or line of credit. It’s the original person you committed to paying when you took on the debt.

For example, your credit card might be serviced through your bank. In that case, you’re committing to paying the bank when you insert your credit card to purchase something. That makes your bank the original creditor.

Likewise, if you take out a personal loan with a company, that company is the original creditor. A different type of creditor would be a hospital where you receive treatment for an ailment or accident. You obtained services that you committed to paying for and now owe money for those services.

The hospital where you received treatment might be part of a larger health system. In this case, the larger health system might also be the original creditor.

If you received information about a lawsuit, the best way to know the entity suing you is to look at the documents for the “plaintiff.” The plaintiff is the one filing a lawsuit against you. When you don’t recognize the name of the company, it might be a junk debt buyer.

Junk debt buyer explained

Junk debt buyers look for debt that the original creditor deems to be uncollectible. Debt that is “charged off” is not debt that no longer needs to be paid. Instead, it means that your original debtor doesn’t believe they’ll be able to collect this money.

Often, junk debt collectors take on credit card debt, car loans, overdue telecommunication accounts or retail accounts. These junk debt collectors purchase the debt for pennies on the dollar. They then make money by collecting that debt when others cannot. This is generally through a lawsuit against the person who took out the original debt.

Sometimes, your debt gets transferred from one junk debt buyer to another. So if you don’t recognize the plaintiff on the account as an organization you’ve heard from before, this might be why. Debt can be sold several times because there are dozens of junk debt buyers out there.

What you need to know about lawsuits from junk debt buyers

Junk debt buyers generally purchase debts in bulk, which means they take on hundreds of loans from hundreds of individuals from the same original debtor. That means that the junk debt buyer knows very little about your debt before taking it on.

Because of this, the junk debt buyer often doesn’t get any supporting documentation about your loan. Documents missing might include the original loan documents or billing statements showing what you now owe.

Another problem is that the statute of limitations for the debt collector to seek this money might have passed. That means you no longer have an obligation to pay the debt.

And yet, these cases often lead people to file for bankruptcy because they don’t know their rights when it comes to junk debt collections. You should investigate the situation carefully before making payments on a bill you don’t recognize. And you should talk to a lawyer before deciding the bankruptcy is the only option for you.

Contact our office for more information about debts that bankruptcy can discharge.