When a business files for bankruptcy, it is often left with several outstanding debts that it cannot pay. In some cases, the company may decide to sell its bankruptcy claims to recoup some of the losses. This process can be complex, and there are many things you need to know before you decide to pursue this option. This blog post will take a closer look at the process of selling bankruptcy claims and discuss some of the things you need to consider before making a decision.
Types of bankruptcy claims
One of the first things you need to understand is that there are two types of bankruptcy claims: secured and unsecured. Secured claims are those that are backed by collateral, such as a mortgage or car loan. More often than not, these claims are paid in full because the creditor has a legal right to seize the collateral if the debt is not repaid.
Unsecured claims, on the other hand, are not backed by any collateral and are therefore more difficult to sell. In this case, you need to have a good idea of who buys bankruptcy claims for you to be able to understand how to best sell your own, particularly if it is unsecured. Rest assured that there are several options available to you, but each comes with its own set of pros and cons. For instance, you can sell your claim to an individual or a company that specializes in buying these types of debts.
You can also negotiate with the creditor directly to see if they are willing to accept a lump sum payment that is less than the total amount owed. This option is often referred to as a “debt settlement.” While it can be difficult to get a creditor to agree to this, it is sometimes possible to do if you can offer a reasonable payment amount. This means that you need to do your research ahead of time to figure out what a fair settlement offer would be.
The claims-buying process
- Auction
Once you have a clear understanding of the different types of bankruptcy claims, you can begin to look at the claims-buying process. This is typically done through an auction, where interested buyers submit bids for the claim. The highest bidder will then be awarded the claim. In some cases, the court may approve a sale outside of the auction process, but this is not always the case. It is important to note that you will need to have your claim approved by the court before it can be sold.
- The court decides
The court will ultimately decide whether or not to approve the sale of your claim. They will consider many factors, including the amount of the debt, the value of the collateral, and the likelihood that the debtor will be able to repay the debt. In some cases, the court may also consider whether or not any other creditors have a claim on the same property. Once the court has made a decision, you will be notified of their decision and can proceed with the sale accordingly. If you are not happy with the court’s decision, you do have the option to appeal. However, this is a complex process, and you should speak with an attorney before moving forward.
- Selling your claim
Finding a buyer
Once you have gone through the court process and have been given the green light to sell your claim, you can begin reaching out to potential buyers. As mentioned earlier, several different types of buyers may be interested in purchasing your claim. You will need to determine which type of buyer is the best fit for you and your particular situation.
Negotiating a sales price
You will also need to negotiate a sales price for your claim, which can be done through many methods, but it is important to make sure that you are getting a fair amount. You should also keep in mind that the buyer may want to take on some of the risk associated with the claim, so you may not be able to get the full value of the claim.
Drafting a sales contract
Once you have negotiated a sales price, you will need to draft a sales contract. This contract should include all of the relevant information about the sale, including the amount of the debt, the value of the collateral, and the terms of the sale. Once the contract is signed, you will be able to proceed with the sale.
Selling bankruptcy claims can be a complex process, but it can be very beneficial for businesses that are struggling to make ends meet. Rest assured that with a little bit of research and planning, you can ensure that you are getting the best possible deal on the sale of your claim.
