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Bankruptcy Creditors
SELLING BENEFITS
There are several advantages to selling, and monetizing a bankruptcy claim. Following are the most common reasons bankruptcy creditors typically sell their claims.
- The mitigation and elimination of risk associated with holding a bankruptcy claim. The sale of a claim also removes the risk of receiving:
- Illiquid equity securities with potentially limited marketability and unknown true market value; and/or
- Small distribution checks over a long period of time.
- A lump-sum cash payment, giving a creditor immediate cash flow and the ability to reinvest the recovered capital into their business sooner than otherwise expected.
- The elimination of the time, energy, human and financial capital, and other resources required to monitor and protect a creditor's interests in a case.
- The time value of money and possibility of receiving more for a claim now, then waiting until the resolution of the estate.
- The removal of debt off the business's books. If the receivable had already been written off, the creditor may receive an unexpected cash recovery through the sale.
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