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A creditor walking in the shoes of consumers

Debt collectors are the bane of consumers dealing with financial problems. Continuous phone calls, final notices, lawsuits and other threats become a plague. Representatives of collection agencies have little, if any sympathy for the people they target for what often amounts to harassment.

However, in an unusual example of irony, one collection agency may now have a certain level of empathy.

Like the consumers they called, SquareTwo Financial found itself saddled with overwhelming debts to the tune of $460 million with reported assets of $230 million. With no other option, the Centennial-based debt collector filed for Chapter 11 bankruptcy.

A spokesperson confirmed that the agency would shut down all operations that include a 60,000 square foot office by the end of 2017.

The former Collect America, founded by attorney P. Scott Lowery, would purchase past-due debts from various lenders and credit card companies, some for pennies on the dollar. KRG Capital Partners acquired the company for $350 million in 2005 and renamed it SquareTwo in 2009. In a bond issue the following year, the company raised $475 billion.

Yet the company struggled to get out of the red.

SEC filings showed that SquareTwo reported net losses from 2009 to 2011. A return to profitability in 2012 and 2013 was short-lived, resulting in collection agency’s largest net loss of 117.7 million in 2015.

SquareTwo tried to reduce costs, even attempting to restructure outside of bankruptcy court. In 2015, it secured a new set of loans to buy back existing debt. After a failed search for potential buyers, bankruptcy became their only option.

Consumers from all walks of life and businesses in a variety of industries can find themselves in financial trouble. Discharging or reorganizing overwhelming debts is often the best way to secure a much-needed fresh start.

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