The question every creditor asks before selling: how much is my debt actually worth? The short answer: whatever an investor is willing to pay for it. The long answer depends on five factors.
1. The debtor's solvency
This is the most important factor. A debt against a trading company with assets is worth far more than one against a dissolved company or an insolvent individual. Buyers investigate the debtor before making an offer: trading status, assets, charges, other proceedings...
2. The age of the debt
The more recent, the better. Debts under a year old sell at smaller discounts; after 3–4 years the discount grows significantly. Remember the limitation periods: under the Limitation Act 1980, simple contract debts become statute-barred 6 years after the cause of action (or the last acknowledgement/payment).
3. The available documentation
Signed invoices, delivery notes, contracts, or a written acknowledgement of debt multiply the value. A debt without paperwork has practically no market.
4. Whether there are court proceedings
A debt with a County Court Judgment (CCJ) removes the legal risk (only the collection risk remains) and commands a better price. Some investors, on the other hand, prefer debts without proceedings so they can manage the claim themselves.
5. The total amount
Very small debts attract less interest (fixed recovery costs weigh too much) and very large ones reduce the pool of potential buyers. Debt portfolios allow small amounts to be grouped together and made attractive.
What discount should I apply?
As a guide: recent, documented debts with a solvent debtor, discounts of 20–40%; medium-risk debts, 40–70%; old or hard-to-collect debts, discounts above 70% or sale "open to offers".
On debtalia we always recommend listing with a minimum 20% discount and marking the price as negotiable: the market will quickly tell you whether your expectation is realistic.
The cost of not selling
When valuing your debt, always compare with the alternative: years of court action, court fees, solicitors, and the real possibility of collecting nothing if the debtor becomes insolvent. A reasonable discount today is usually better business than an uncertain claim tomorrow.
