Believe it or not, there are companies out there that will buy old or bad debt for pennies on the dollar. Debt buyers will purchase debts that are too old to collect or that were discharged in a bankruptcy filing. Some individuals discover that old debts will resurface on their credit report even after discharging those debts in a bankruptcy.
So why would any reasonable business purchase these debts? It's quite simple: most people don't know their rights. If a business purchases $10,000 in bad debt for $1,000, it only needs to collect $1,000.01 to make a profit. The prospect is even more attractive when even collecting a small "good faith" payment can renew the debt obligation, converting bad debt into collectable debt.
This is why it is important for consumers to monitor their credit reports every year. It is doubly important if you have filed a bankruptcy in the past. No matter who owns your discharged debt, the Fair Debt Collection Practices Act, the U.S. Bankruptcy Code, the Fair Credit Reporting Act, and other federal and state laws may protect you from attempts to collect those debts.
If a creditor re-reports a discharged debt as anything other than a zero balance with a notation reflecting the bankruptcy discharge, you may have a cause of action.
If a creditor sells your discharged debt to a third party, who then reports it on your credit, you may have a cause of action.
However, you may never know that you have been wronged unless you make it a habit to keep up with your credit report. It is also important to stay on top of lawsuits. In some situations, a debt buyer can convert an old or bad debt into a collectable judgment. How is this possible? Default judgments. If you don't respond to a lawsuit, even one based on a discharged debt, a court may still issue a judgment against you. Once that judgment is issued, it will be much more difficult to contest the improper collection attempt.
As always, it is best to consult with an attorney if you think you may have a claim against a debt buyer.