Purchasing a note in Ch. 13 bankruptcy

[Anh N.]

Hi,

I'm looking into purchasing a second lien note where the borrower is in Ch. 13 bankruptcy.  There's $80K in arrears and $100K principal owed. The seller of the note is asking for $85K.  Under Ch. 13, the borrower will pay back the $80K arrears over 5 years.  I start getting payment on the $100K principal and interest after the five years.  Is this a good buy?  It seems like I'll be making zero interest in the first 5 years which doesn't seem like a good strategy.  Any feedback would be appreciated.  Thanks!

[Andy Mirza]

@Anh N. I think you answered your own question when you stated that you didn't think that the borrower could make the payments and wondered if it would be worth the hassle. To me, this means the note is worth a lot less if I were to take on that risk. At what price point would this deal be worth the risk to you? IMO, you should stick to that number. If the seller doesn't agree, move on to the next deal.