Assignment of Debt
The legal transfer of a creditor's right to collect a debt from the original holder to a new owner, typically through a portfolio sale.
Accounts Receivable
Money owed to a business by its customers for goods or services delivered on credit. When these become uncollectible, they may be sold as charged-off receivables.
Balance Sheet Clean-Up
The strategic removal of non-performing or charged-off assets from a company's financial statements, often through portfolio sales to third-party buyers.
Bid Process
A competitive procedure where multiple potential buyers submit offers for a debt portfolio. Typically managed through a structured RFP with defined timelines and evaluation criteria.
Charge-Off
An accounting action by a creditor declaring that a debt is unlikely to be collected. Typically occurs after 180 days of non-payment. The debtor still owes the balance.
Chain of Title
The documented history of ownership transfers for a debt account from origination to the current holder. Essential for establishing legal standing to collect.
Consumer Receivables
Outstanding debts owed by individual consumers, as opposed to commercial or business debts. Includes credit cards, personal loans, and installment financing.
Data Tape
A structured spreadsheet or database file containing account-level information for a debt portfolio, including balances, account ages, and borrower details. Used during due diligence.
Debt Buyer
A company that purchases portfolios of defaulted or charged-off receivables from original creditors or other holders, typically at a discount to face value.
Deficiency Balance
The remaining amount owed after a secured asset is repossessed and sold for less than the outstanding loan balance. Common in auto lending and mortgage lending.
Due Diligence
The investigation and analysis a buyer conducts before acquiring a debt portfolio. Includes reviewing documentation, data quality, regulatory compliance, and recovery potential.
Portfolio Sale
A transaction where a creditor sells a bundle of debt accounts to a buyer. The buyer pays a lump sum (typically a percentage of face value) and assumes ownership and collection rights.
Purchase and Sale Agreement (PSA)
The legal contract governing a debt portfolio transaction. Covers purchase price, representations, warranties, documentation delivery, and post-sale obligations.
Putback Rights
Contractual provisions allowing a portfolio buyer to return specific accounts to the seller if they fail to meet agreed-upon criteria, such as documentation completeness or account validity.
Recovery Rate
The percentage of the outstanding debt balance that is successfully collected. Recovery rates vary based on debt age, type, documentation quality, and collection strategy.
Representations and Warranties
Contractual statements by the seller about the portfolio's characteristics, such as documentation completeness, account validity, and compliance history.
Secondary Debt Market
The marketplace where defaulted or non-performing debt is bought and sold between parties after it leaves the original creditor. Includes portfolio sales, forward-flow, and brokered transactions.
Subrogation
The right of one party (typically an insurer) to step into the legal position of another party to pursue a claim or recovery. Common in insurance and secured lending contexts.