Debt Relief Hotline

Charge Off Debt

The definition of a charged off debt: a Bad debt expense that arises when a company is unable to collect on some or all of the money owed on a legal debt.  The company will then report on the income statement that this account has been charged off as a bad debt and therefore it is a loss to the company. Typically an account is charged off after 180 days of insufficient payments and will remain as a negative account on your credit report for seven years from the date of last activity.

Consequences of a Charged off Debt

Most consumers believe that when a debt has been “charged off” the debt has been cancelled by the original creditor.  This cannot be further from the truth; you are still legally responsible for repaying the debt and there will be repercussions if the debt is not settled. 

Even though your creditor has written your debt off as a loss in its financial records, you don't get off scot free.  When this occurs, the company has many options to try and collect the debt based on the state where the debtor lives.

The first thing the creditor will do is post negative information on your credit report.  In the comments section on the credit report, it will show your account has been “Charged Off” and in the account status field, a I-9 will be stamped to your credit report; the only status worse than an I-9 is a bankruptcy filing or consumer credit counseling filing.

The next thing a creditor will do is try and collect the debt thru the use of a third party collection agency.  These bill collectors will typically call you at work, on your cell phone, at home, and even contact your relatives until you pay the debt.

Another option the creditor has is to hire an attorney that will sue you in civil court.  There are many possible outcomes to the lawsuit, the most common is a judgment entered against the debtor. 

The only way to remove a charge-off from your credit report and resolve the debt is to wait the seven-year period for the account to no longer post to your credit report or pay the debt.

How to deal with a charge off

You have two choices when it comes to paying the debt, you can pay it in full or the recommended method of settling the debt.  Whether or not you pay the full amount demanded or settlement for less than what is owed, the same outcome will occur, your credit report will no longer report a charge off account.

Once your account has been charged off, the smartest thing a consumer can do is have a debt settlement company negotiate a settlement on the account. The reason this is the best decision is you take care of the debt, no more legal action can be taken against you, you will save 40-60% from what the balance is reporting, and it will improve your credit score.