CFB....I deal with late notes every single day, and none of what you posted makes a bit of sense to me.
"Once you get into the territory where the recovery rate is really bad I doubt anyone would buy it,"
Totally untrue. There's a buyer for every note at the right price. I've sold everything from "Deceased Borrower" to "Chapter 7". Ask Core. He'll back this statement. So will anybody else who's ever sold a bad note on Folio.
"the irritation over selling a late note and then having the borrower start paying again,"
SINCE WHEN IS A PAYING BORROWER AN IRRITATION? I've had 67 late notes this month make a payment, and get cancelled by Folio. It takes me about 5 minutes to get cancelled notes back up on Folio. I am not sure where the hassle is. I get the payment, and the note still sells.
"the high rate of bankruptcies and disappearances/scammers among my late notes which would make them practically unsellable,"
Your crystal ball must be much better than mine. I can't tell for sure who's a scammer, disappearance, felon, conartist, a zombie, a smurf, black, white, yellow or blue. Neither can the buyers who are buying my questionable notes. Point is, nobody knows.
" and the further complication of the tax situation."
What tax complication?
If a note defaults for $24 during the first year, it's a short-term Capital Loss.
If you sell the note for $10, you still have a short-term Capital Loss, only it's $14.
Regardless of how you cut it, you'll be doing the same paperwork at tax time.
If you are not claiming your losses at tax time, you're really screwing yourself over.
"But most of my notes are $25 ones and my default rate isn't that bad."
Even if you had just one default this year, it's one default you could have easily dodged.
I guess the difference is that I don't have money to burn.