Campaigners in USA buy individuals' debts for pennies and write them off

[gravytrain]

Re: Campaigners in USA buy individuals' debts for pennies and write them off

Banks can only lend what they have available, the amount they hold on deposit may not represent the actual deposited funds, but this does not mean that loans aren't real money.

If you get a loan for a car, you can be sure the garage will want the readies, not an assurance of an equity in some bank.

Fractional banking is the practice of using deposited funds to finance other enterprises that should profit the bank( and the result of many of the current woes)

It does not mean that when you get a loan you do not actually get the cash, even if it is just added to your bank account.

[gravytrain]

Re: Campaigners in USA buy individuals' debts for pennies and write them off

EDIT: bad debts, are actually listed on balance sheets, balance sheets are assets over liabilities. even that in itself is not physical money, any accountant will tell you that.

Sorry missed this recent edit.

Bad debt does not appear on a balance sheet it is an expense and appears on the p and L as said earlier.

When the balance sheet for the period is prepared the actual bad debt will be reconciled with write off allowance and entered or deducted from the reserve.

At least this is the way I used to do it
I am sure if you Google the question an accountant will confirm this.

No the balance sheet is not physical money, it is a balance sheet

[SXGuy]

Re: Campaigners in USA buy individuals' debts for pennies and write them off

EDIT: removed some of my points because i think they actually agreed with you rather than contradict what you said LOL

The practice of fractional reserve banking expands credit and therefore also expands the money supply (demand deposits and cash) beyond what it would otherwise be in a stable money system. Due to the prevalence of fractional reserve banking, the broad money supply (deposits created via the issuance of loans plus cash) is a much larger multiple than the amount of "real" paper currency created by the country's central bank. That multiple (called the money multiplier) is determined by the reserve requirement or other financial ratio requirements imposed by financial regulators, and by the excess reserves kept by commercial banks.

[Never-In-Doubt]

Re: Campaigners in USA buy individuals' debts for pennies and write them off

We have accountants on here but I own companies and anything I give away etc is tax deductible. My accountant deals with it.

Likewise if I wanted to sell a debt someone has with me, I would not pay it. The ltd company would deduct it from its tax liabilities as a business loss. So say you owed me £10k and I sold it for £1k to a dca; my books would be £9k down which would then get taken from my corporation tax as a loss.

I'd in essence be no worse or better off, as a business. It's still cost me the same as I have not benefited in any sense nor has my business. It's as though the original deal never took place.

[SXGuy]

Re: Campaigners in USA buy individuals' debts for pennies and write them off

Sorry missed this recent edit.

Bad debt does not appear on a balance sheet it is an expense and appears on the p and L as said earlier.

When the balance sheet for the period is prepared the actual bad debt will be reconciled with write off allowance and entered or deducted from the reserve.

At least this is the way I used to do it
I am sure if you Google the question an accountant will confirm this.

No the balance sheet is not physical money, it is a balance sheet

Sorry i was refering to the bad debt allowance which is shown on the balance sheet, but you are correct, there can be a bad debt expense shown on the p & l as well.

I was simply trying to refer to the balance sheet as an example of how something can be used to show equity, without the real need for physical money.

And just to go back to you comment about a garage wanting the readies not an assurance by the bank, then what is money if its not a promisary note?

All money, is a promise to pay the bearer the sum equal to the value of the note. All money, IS an assurance.

[gravytrain]

Re: Campaigners in USA buy individuals' debts for pennies and write them off

We have accountants on here but I own companies and anything I give away etc is tax deductible. My accountant deals with it.

Likewise if I wanted to sell a debt someone has with me, I would not pay it. The ltd company would deduct it from its tax liabilities as a business loss. So say you owed me £10k and I sold it for £1k to a dca; my books would be £9k down which would then get taken from my corporation tax as a loss.

I'd in essence be no worse or better off, as a business. It's still cost me the same as I have not benefited in any sense nor has my business. It's as though the original deal never took place.

So if you had not sold it you would have have written of the total amount.
So as far as the actual loss and therefore the value of what is being sold that also must be zero.

I suppose you could say that any income form the sale would generate tax income to offset the taxman losses but that is all.

[Never-In-Doubt]

Re: Campaigners in USA buy individuals' debts for pennies and write them off

Exactly. The fact I sold it would BENEFIT the taxman as he'd get tax on the £1k sale.

Weird world we live in....

[gravytrain]

Re: Campaigners in USA buy individuals' debts for pennies and write them off

Personally I have a feeling that these accounts are written off and then sold.

I think they completely disappear from the balance sheet once they become uncollectable(is that a word).

I think the whole DCA industry is run on a tax fiddle.

Well perhaps not, but it would be nice if we could prove it.

[SXGuy]

Re: Campaigners in USA buy individuals' debts for pennies and write them off

It wouldnt suprise me. We dont need to look far to see how other companies, bigger than any DCA fiddle everyday. lol

[cardiac arrest]

Re: Campaigners in USA buy individuals' debts for pennies and write them off

Why Occupy's plan to cancel consumer debts is money well spent | Charles Eisenstein | Comment is free | guardian.co.uk

occupy movement pushing for 'Rolling Jubilee'...see link above

[jon1965]

Re: Campaigners in USA buy individuals' debts for pennies and write them off

We have accountants on here but I own companies and anything I give away etc is tax deductible. My accountant deals with it.

Likewise if I wanted to sell a debt someone has with me, I would not pay it. The ltd company would deduct it from its tax liabilities as a business loss. So say you owed me £10k and I sold it for £1k to a dca; my books would be £9k down which would then get taken from my corporation tax as a loss.

I'd in essence be no worse or better off, as a business. It's still cost me the same as I have not benefited in any sense nor has my business. It's as though the original deal never took place.

I am guessing that if you provide a service and do not put a real terms value on your time then you would not be, If however you buy something for 5K sell it for 10 but then have to sell the debt for 1K you would in fact have made a loss in real money of 4K
When I worked in a supermarket it used to piss me off that they always worked out stock loss at retail yet when I worked at McD's waste was always at cost

[jon1965]

Re: Campaigners in USA buy individuals' debts for pennies and write them off

Bit behind on this one, when banks issue their results there is always a provision for "bad" debt which I assume is what they can not collect. This comes off bottom line and hence tax liabilities

[cardiac arrest]

Re: Campaigners in USA buy individuals' debts for pennies and write them off

All banks have bad debt provisions held on their balance sheets, added to or reduced each year by an entry on the P&L account. So yes, all the provision is before corp tax and thus reduces tax liability. You could say 'every' contract has an element of bad debt provision built in to it...when debts are actually 'written off' to the balance sheet provision they have been fully tax deductable.

So a £10k debt has cost £6k...if corp tax is 40%. less any payments and the interest 'profit' made. A DCA will go through the same process, but with a higher bad debt provision due to the nature of the acquired debts..So a DCA buys the debt for 10%, say £1k...and again a write off would cost them £600.00 less any payments made and interest charges/fees etc.

It's a pity we can not set up our own licensed company and buy these debts, en bloc, and simply write them off..funded by debtors paying the true cost plus an admin charge to manage the operation...That would put paid to the DCA's...

[cardiac arrest]

Re: Campaigners in USA buy individuals' debts for pennies and write them off

Further to the above, I wonder if it would be possible to do a deal with a Licensed operator...tell them to offer to buy the debt, at the normal DCA to DCA price (that's the £1k figure in the example above)..and agree to give them , say, £1500 to kill it.. They make a quick and easy £500, no letters, no hassle...

[SXGuy]

Re: Campaigners in USA buy individuals' debts for pennies and write them off

Just out of interest, why cant we do it? what are the rules regarding obtaining a CCL? surely someone can meet the requirements?