Yes, you can sell a debt someone owes you to a collection agency or debt buyer. The sale transfers ownership of the account to the buyer in exchange for a one-time payment, usually a small fraction of the face value. You get cash now and are done with the account; the buyer takes on the work and the risk of collecting, and keeps whatever they recover.
Whether that trade makes sense depends on how much the buyer will pay, what your paperwork looks like, and how the debt would be taxed if you took the loss instead.
Selling the Debt or Placing It for Collection
These two options are often confused, and they work very differently.
Selling transfers ownership completely. You receive a lump sum, the buyer takes over all collection rights, and you have no further claim to anything the debtor later pays. You get money quickly, but far less than the full balance.
Placing a debt with a collection agency leaves ownership with you. The agency pursues the debtor on your behalf and takes a commission on whatever it recovers, often 25% to 50% of the collected amount. If the agency succeeds, you end up with more money than a sale would produce. If it fails, you get nothing.
For an individual holding a single personal IOU, selling outright is usually the more practical route. Businesses with steady streams of delinquent accounts sometimes use both approaches, splitting accounts by age or type.
When You’re Legally Allowed to Sell
The right to sell a debt comes from a long-standing contract-law principle: a creditor can assign the right to receive payment to someone else. Courts favor free transferability of financial obligations, and most standard loan agreements, invoices, and credit contracts allow assignment without the debtor’s consent.
The main exception is an anti-assignment clause. If the original contract prohibits transfer to a third party, a sale can be challenged. These clauses appear more often in specialized service agreements than in standard lending or retail credit documents. Before you offer a debt for sale, read the underlying contract for language restricting assignment.
What a Debt Actually Sells For
Buyers pay a fraction of face value, and that fraction varies widely. Publicly traded debt buyers reported average purchase prices around 9% to 12% of face value in 2024, and the Consumer Financial Protection Bureau found that major credit card issuers were selling recently charged-off accounts for roughly 16% of face value in 2022. At the other end, old medical debt or accounts that have already been resold can trade for as little as 1% to 2%. Debts more than five years old sometimes sell for less than a cent on the dollar.
The factors that move the price:
- Age of the debt. Newer accounts are worth far more.
- Type of debt. Credit card and auto deficiency balances command higher prices than medical or telecom debt.
- Documentation quality. A complete file with the signed agreement, payment history, and debtor contact information is worth substantially more than a spreadsheet of balances.
- Prior collection attempts. Accounts that already came back uncollected from one or more agencies are worth less.
- Volume. Larger portfolios receive better per-account pricing because the buyer’s due-diligence costs spread across more accounts.
If you’re selling a single personal IOU rather than a portfolio, expect the low end of these ranges. One account is expensive for a buyer to evaluate relative to its size.
Documentation Buyers Will Want
Debt buyers scrutinize paperwork because incomplete records make an account harder and riskier to collect. Before contacting a buyer, gather:
- The original agreement: a signed contract, promissory note, or detailed invoice establishing the obligation and its terms.
- A payment ledger showing every payment received and every missed installment, with dates, and how the current balance was calculated, including any interest or late fees the original terms allowed.
- Debtor identification: full name, Social Security number or employer identification number if available, and current and past addresses.
- The date of the last payment. This often determines when the statute of limitations clock started running.
- Any correspondence between you and the debtor, especially anything acknowledging the debt or disputing specific charges.
How the Sale Works
For an individual or small business selling a handful of accounts, the process is straightforward. You contact debt buyers, provide the documentation package, and the buyer evaluates the accounts. During its review, the buyer verifies the debt’s validity, checks the statute of limitations, and assesses the debtor’s likely ability to pay. This vetting can take a few days to several weeks.
Once the buyer accepts, both sides sign a bill of sale or assignment agreement that identifies the parties, specifies the exact balance being transferred, and records the purchase price.1SEC. EX-10.12 Assignment of Debt Agreement Payment follows, usually by wire. At that point you no longer have any legal claim to the debt, and the buyer owns it outright.
The buyer will typically provide its own template agreement. Read it carefully. Errors in the balance, debtor identification, or interest rate can give the buyer grounds to demand a refund later.
Warranties and Repurchase Clauses
Most agreements require the seller to make certain promises: that the debt is valid, that you’re the rightful owner, and that the balance is accurate as stated. If those representations turn out to be false, the buyer can generally demand that you repurchase the account at the original sale price.
Common repurchase triggers include a debtor who had already paid the balance in full before the sale, a debt that was discharged in bankruptcy, or a seller who lacked the legal right to assign the account. Large institutional sellers like banks often sell “as is” with minimal guarantees. Smaller sellers usually face broader warranty terms.
Pay attention to how long the repurchase right stays open. Some agreements give the buyer a narrow window to identify problems; others leave the right open indefinitely. A time-limited repurchase obligation is significantly less risky for you.
What Happens to the Debtor After You Sell
The Fair Debt Collection Practices Act governs how debts are collected after a sale, but only for consumer debts, meaning obligations incurred for personal, family, or household purposes.2Federal Trade Commission. Fair Debt Collection Practices Act Text Business-to-business debts fall outside its scope.
The FDCPA generally doesn’t apply to an original creditor collecting its own debt. It targets third-party collectors, including debt buyers who purchase accounts already in default at the time of purchase.3Office of the Law Revision Counsel. 15 USC 1692a – Definitions So once you sell a consumer debt, the buyer becomes subject to the full FDCPA framework even though you were not.
Within five days of first contacting the debtor, the buyer must send a written validation notice stating the amount owed, the name of the creditor, and that the debtor has 30 days to dispute the debt in writing.4Office of the Law Revision Counsel. 15 USC 1692g – Validation of Debts If the debtor disputes within that window, the buyer must pause collection until it obtains and mails verification.
You aren’t federally required to notify the debtor yourself, but sending a short “goodbye letter” informing them the account has been transferred is good practice. It reduces confusion and keeps payments from going to the wrong party. One exception matters: Regulation F requires the original creditor to send the debtor written notice before the buyer uses an email address obtained from the creditor, disclosing that the debt has been or will be transferred and giving the debtor at least 35 days to opt out of email contact from the buyer.5eCFR. 12 CFR Part 1006 Subpart B – Rules for FDCPA Debt Collectors
How the Statute of Limitations Affects the Sale
Every state sets a time limit for filing a collection lawsuit, typically three to fifteen years depending on the state and the type of agreement. Once that period expires, the debt is “time-barred,” and a collector who sues on it violates the FDCPA.6Consumer Financial Protection Bureau. Can Debt Collectors Collect a Debt That’s Several Years Old?
A time-barred debt can still be legally sold. It doesn’t disappear when the limitations period expires. Buyers can still ask the debtor for voluntary payment; they just can’t sue or threaten suit. As a result, time-barred accounts sell for dramatically less, sometimes under a cent on the dollar for older accounts that have already been through multiple collection attempts.
The clock typically starts on the date of the debtor’s last payment or the date of default, but rules vary by state. Document the date of last activity carefully. Misstating it can trigger a repurchase obligation and expose the buyer to FDCPA liability.
Tax Treatment of Selling at a Loss
When you sell for less than face value, the difference between what you were owed and what you received may be deductible. The tax treatment depends on whether the debt arose from your trade or business.
A business bad debt qualifies for an ordinary deduction. If you sold a $10,000 receivable for $1,000, you may be able to deduct the $9,000 loss as a business expense. Business debts also qualify for a partial deduction: if you’ve written off part of the balance as uncollectible during the tax year, you can deduct that portion even before the debt is completely worthless.7Office of the Law Revision Counsel. 26 USC 166 – Bad Debts
A nonbusiness bad debt, like a personal loan to a friend or family member, is treated less generously. It must be totally worthless to qualify for a deduction, and the loss is a short-term capital loss subject to the usual capital loss limits: $3,000 per year against ordinary income, with the remainder carried forward.8Internal Revenue Service. Topic No. 453, Bad Debt Deduction You report it on Form 8949 with a statement describing the debt, the debtor, your collection efforts, and why the debt became worthless.
If you’re weighing whether to sell a personal debt for pennies on the dollar or write it off entirely, the tax math matters. Selling for any amount means the debt isn’t technically “totally worthless,” which can complicate a nonbusiness bad debt deduction. Talk to a tax professional before choosing, because the difference between business and nonbusiness classification can meaningfully change your after-tax recovery.9Internal Revenue Service. Publication 544 (2025), Sales and Other Dispositions of Assets