Debt Exchange: What It Is, Which Debts Can Be Sold and How It Works

A debt exchange is actually a receivables exchange: a place where creditors can offer for sale a debt owed to them. As a result of the transaction, the existing creditor receives a specified amount and then, through the so-called assignment of receivables, transfers the right to demand payment from the debtor to the person who bought the “debt”.

What is the sale of receivables?

Debt exchange is regulated in Poland by Article 509 of the Civil Code. Under it, a creditor has the right to transfer the right to receivables to a third party without the debtor’s consent. There is only one condition: this cannot be done if the sale of the given receivable would conflict with the law, a contractual stipulation or the nature of the obligation.

The sale of a debt is most often preceded by signing an assignment of receivables agreement. The person selling it is the assignor, while the buyer is the assignee.

Debt exchanges are becoming increasingly popular in the world of finance because their main benefit is recovering at least part of the payment due. This is often a much better option than pursuing the debtor independently, without any guarantee that the recovery will be successful.

What debts can be sold?

As a general rule, a creditor can sell almost any debt. This is very good news, as it turns out that this option is available to a wide range of people entitled to demand a claim from someone—from private individuals to businesses.

Receivables may be sold, among other things, under contracts or any properly documented claims, such as invoices, debit notes, contracts or promissory notes.

The most important condition, however, is that the receivable offered for sale must exist. Moreover, it may be due for payment—for example, the invoice payment deadline has passed—or not yet due, where the payment deadline has not yet arrived.

Which debts are most readily purchased?

Due to the nature of the transaction itself and the risk associated with investing in the purchase of debt, not everyone wants to acquire a receivable, and even when they do, it will never be for the full amount of the debt.

Buyers primarily consider how likely they are to recover the money in full from the debtor. The lower the probability, the smaller the pool of potential buyers. On the other hand, this is understandable, because the purchase is intended primarily to generate a profit. For example, if someone buys a receivable worth PLN 50,000 for PLN 20,000 and then recovers the entire amount from the debtor, the new owner gains PLN 30,000.

The following receivables sell best on debt exchanges:

those with a good chance of being recovered at their full value (for example, the debtor owns substantial assets that can be sold),
those that arose relatively recently (the more recent the case, the greater the likelihood of recovering the money from the debtor),
those secured, for example, by a promissory note,
for which no court proceedings have been conducted,
for which no bailiff enforcement attempt has been made,
that have been acknowledged by the debtor (preferably in writing),
that can be pursued in court,
that have no other creditors.

It is also much easier to sell a receivable that has been documented correctly and reliably.

Where can you sell a debt owed to you?

As the name suggests, a debt exchange is an exchange—a place where creditors offer debts for sale.

There are currently many services where it is possible to acquire the rights to pursue a claim in this way. Which one you choose depends on your personal preferences.

What information must a debt-sale listing contain?

Anyone who wants to transfer a receivable to a third party using exchanges intended for this purpose must remember that the listing must meet certain criteria, meaning it must contain information such as:

the amount of the debt;
how long the payment deadline has been overdue (or when the payment deadline will expire);
the debtor’s details (first name, surname and address, and, for companies, also the NIP tax identification number);
the proposed sale price (usually lower than the value of the receivable).

Moreover, publishing this type of information about an indebted person is entirely legal, as it does not violate the provisions of the General Data Protection Regulation (GDPR).

An alternative to selling a debt

If, for various reasons, you do not want to dispose of your receivable and use a debt exchange, consider alternative options for support in recovering the overdue amount from your debtor.

One of the most effective and fastest methods is to cooperate with a debt collection company that professionally collects debts in an ethical and professional manner.

If the claim is not yet due for payment, meaning the payment deadline has not passed—for example, for an invoice—and you run your own business and need to obtain cash immediately, try factoring, a service provided by specialised factoring companies. This is a completely safe and highly beneficial solution for businesses throughout Poland.

What Is a Debt Exchange?