For years, creditors unwilling to take the time (or risk) to wait for payments from a bankrupt company have been able to sell their claims to distressed investors. But as the secondary market has grown, so have questions about the practice.
Distressed investors have long jumped at the chance to pay pennies on the dollar to acquire a claim that they are betting will pay out at a much higher rate. They say they provide a service to the creditors, often vendors and suppliers, by giving them a quick and certain payout in an inherently uncertain situation.
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