A commercial debt portfolio is priced on the assumption that some share of the accounts will pay. Whether that assumption holds depends on facts that can be checked before the purchase closes: what the contracts say, whether the seller can prove it owns the accounts, how old they are, how well they are documented, and who the debtors are. Buyers who check these things pay for collectible paper. Buyers who skip them often discover, after the first round of demand letters, that a meaningful portion of what they bought cannot be collected at any price.
This article is written for debt buyers evaluating commercial portfolios with Illinois debtors or Illinois-governed contracts. It is not about consumer debt, which is governed by a different and more restrictive set of rules.
1. Read the underlying contracts, not just the data tape
The tape tells you balances and dates. The contracts tell you whether those balances are collectible and where. Pull a meaningful sample of the actual agreements and read them for four provisions.
Interest and late fees. If the contract sets a rate, you can collect at that rate. If it is silent, Illinois allows 5% prejudgment interest on money due under a written instrument or an account stated (815 ILCS 205/2), and 9% post-judgment interest on most commercial judgments (735 ILCS 5/2-1303).
Attorney’s fees. Illinois follows the American Rule. You recover your attorney’s fees from the debtor only if the contract, note, or guaranty says so. A portfolio with fee-shifting clauses is worth more than one without, because the cost of collection can be added to the claim rather than subtracted from the recovery.
Forum and venue. Many commercial agreements name a particular court or state. A contract that requires suit in Delaware or New York adds cost and time to collecting from an Illinois debtor, and a clause naming another state’s law may change the limitations period.
Arbitration. SaaS terms, equipment leases, and many lending documents route disputes to arbitration before JAMS, the American Arbitration Association, or another forum. Arbitration is workable for collections, and often faster than court, but the forum fees are higher and the process differs. You need to know before you price the portfolio which accounts go to court and which go to arbitration. See our article on collecting under an arbitration clause.
2. Verify the chain of title
You can only collect what you own. For each account, the seller should be able to produce the bill of sale and assignment documents that trace ownership from the original creditor to the seller, and the account-level data that ties each specific account to that assignment. Portfolios that have changed hands several times often have gaps in this chain. A debtor’s attorney will ask for proof of ownership as the first line of defense, and a court will dismiss a claim the plaintiff cannot show it owns. Insist on the full chain before closing, not after.
3. Check every account’s age against the limitations period
Illinois gives a creditor ten years to sue on a written contract (735 ILCS 5/13-206), five years on an oral agreement (735 ILCS 5/13-205), and four years on a contract for the sale of goods under the UCC (810 ILCS 5/2-725). The clock generally runs from the breach, meaning the missed payment, not the contract date. An account that is past its limitations period is not worthless in every case, since a debtor can still pay voluntarily, but it cannot be sued on, and suing on a time-barred debt creates exposure for the buyer. Sort the tape by last payment date and flag everything approaching or past these lines. If the contract chooses another state’s law, check that state’s period too.
4. Audit the documentation
To obtain a judgment, you need to prove the debt. In practice that means the signed agreement or the terms the debtor accepted, invoices or statements, a payment history, proof of delivery or performance where relevant, and any personal guaranty. Pull a random sample of accounts and ask the seller to produce the full file for each. The percentage of accounts with complete documentation is one of the most reliable predictors of what the portfolio will actually yield.
5. Profile the debtors
An operating business with receivables and bank accounts is a different asset from a dissolved LLC with nothing in it. For business debtors, check the Illinois Secretary of State’s records for status: active, dissolved, or involuntarily dissolved. Look for personal guaranties, which turn a claim against an empty entity into a claim against an individual with wages and property. For individual debtors, note that Illinois exemptions protect a portion of wages and certain property (735 ILCS 5/12-1001), and check for bankruptcy filings, which stop collection entirely. Also identify accounts where a judgment already exists; a judgment more than seven years old needs revival before it can be enforced (735 ILCS 5/12-108).
6. Review prior collection history
Ask what has already been done on each account. Prior demand letters, prior suits, disputes the debtor raised, and settlement offers all inform both value and strategy. An account that has been through two agencies and a lawsuit is not the same as one that has never been contacted.
A note on licensing
Illinois treats persons who purchase accounts in default for collection as collection agencies for purposes of the Illinois Collection Agency Act (225 ILCS 425). Confirm your licensing position before you buy Illinois paper. Attorneys collecting debts in the practice of law are exempt from the Act, which is one reason buyers route Illinois accounts through counsel.
What a pre-purchase review produces
When we review a portfolio for a buyer, the result is a written assessment that sorts the accounts into three groups: worth working, worth working only at a price, and not worth buying, with the reasons for each. It also lays out the collections strategy for the good accounts, forum by forum, with realistic timelines and costs. If the buyer closes and retains us to collect, the review fee is credited against the first months of the standing arrangement. Details are on our portfolio review for debt buyers page, or you can schedule a consultation and send us the tape and a sample of the contracts.
This article is general information about Illinois law, not legal advice for your situation. Humza Ansari is licensed in Illinois only.