Buy debts: a guide for investors

What buying a debt means

Buying a debt means acquiring, by assignment of the claim, the right to collect that a creditor holds against their debtor, paying a price discounted from face value. You become the new owner: if you manage to collect, your return is the gap between what you paid and what you recover. You can buy a single debt or a whole portfolio.

Why invest in debt

Buying debt at a discount offers a different risk-return profile from traditional assets: you buy a right to collect cheaply and your gain depends on your ability to recover it. It is an investment little correlated with the stock market and with a flexible horizon. In exchange, it demands judgement to value the risk and, often, active management of collection.

Where to find debts for sale

On a marketplace like Debtalia, sellers list debts and portfolios with their general data —amount, type of debtor, sector, documentation— without exposing the debtor's identity. You filter for what interests you, review the published information and send your offer. Only if the seller accepts do you access the detailed documentation to close.

How to value a debt before buying

Valuing well is the key to returns. Before bidding, review:

• Documentation: is there a contract, invoice, promissory note or judgment? The stronger, the lower the risk.
• Debtor solvency: if a company, its accounts and activity; if an individual, the evidence and any security.
• Age: how long until the limitation period.
• Status: whether there is a claim in progress, a judgment or insolvency.

The price you offer should leave enough margin to cover the risk of non-payment, the cost of collecting and your target return.

The purchase process step by step

1. 1

   You search and filter

   You explore the listed debts against your investment criteria.

2. 2

   You make your offer

   You send a purchase price to the seller, confidentially.

3. 3

   Due diligence

   If accepted, you review the detailed documentation before closing.

4. 4

   You sign the assignment

   You formalise the assignment, the debtor is notified and you become the owner.

Risks and how to mitigate them

The main risk is not collecting or collecting less than expected. Mitigate it by diversifying (do not concentrate everything in one debt), buying only with solid documentation, verifying solvency and bidding with margin. Another risk is legal: check the claim exists, is enforceable and is not time-barred. The debtor can raise against the new creditor the same defences they had against the original one.

The assignment of the claim

The purchase is formalised as an assignment of the claim. The debtor's consent is not needed, but they must be notified of the assignment so they know to pay you. Debtalia does not take part in the operation: it only connects buyer and seller and charges no commission on the purchase.

After buying: collecting

Once you are the owner, you manage collection: an amicable agreement, a payment plan or court action if needed. Your real return materialises here, so it pays to have a clear recovery strategy before buying.

How to build your first buying portfolio

A prudent investor does not bet everything on a single debt. Build a diversified portfolio: several small deals, with different debtors and sectors, so one isolated default does not ruin the whole. Start with well-documented, low-risk claims to calibrate your real collection times, and raise the bar as you gain experience. Always keep capital for the recovery phase, which also has costs, and track what you bought, at what price and how much you recovered to sharpen your next offers.

Red flags before you buy

Before bidding, be wary if you see any of these signs: documentation that does not match the amount, a debt too close to the limitation period, a debtor impossible to identify or trace, or a seller who avoids pinning down the origin of the claim. None is necessarily fraud, but all justify paying less or asking for more information. Buying cheap is only good business if the price compensates the real risk; a bargain you cannot collect is no bargain.

The role of due diligence

Due diligence is the review you carry out before closing, and it is where money is made or lost. Check the claim exists and is enforceable, that the documentation supports the amount, that it is not time-barred and that the debtor is who the seller says. In a portfolio, review a representative sample and extrapolate. The more rigorous this phase, the fewer surprises later. A good buyer does not fall in love with an opportunity: they verify it before paying.

How the purchase is formalised and notified

Once the price is agreed, the purchase is documented as an assignment of the claim between seller and buyer. The practical step you should not skip is notifying the debtor: although their consent is not needed, notice records that they must now pay you and prevents them paying the previous creditor in good faith. From there, collection management is yours, with whatever strategy you have set.

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