Have you ever heard the term “Charge Off”? Maybe you have missed a couple of payments on a credit card, and you get a call from a customer service representative who tells you that you need to pay now or your account will be charged off. Or maybe you have been told that a debt has been charged off and you don’t know what happens now.
It may sound positive, like your debt has been eliminated or removed. Unfortunately, charge off does not mean that at all, and you are still legally obligated to pay this debt. “Charge off” is simply an accounting term. It means that the creditor believes that the chances of collecting on the debt are very low. Typically, an account will be charged off when it is more than six months’ past due. Because the account is unlikely to be collected, the account is no longer a current asset and the creditor has to move the account off its books. However, this accounting move by the creditor has no effect on your obligation to pay what is owed under your agreement with the creditor.
Once an account goes into charge off status, the creditor has a choice to either take the loss on its books, or try to sell the debt to another company called a “debt buyer” who can collect on the full balance owed. You will likely start being hounded with endless letters and telephone calls from the debt buyer. You can also be sued and if a judgment is entered against you, your wages and bank account can be garnished.
Once a debt is charged off, your credit score is negatively affected. This can cause problems for you when you want to rent an apartment, or make a major purchase, like purchasing a vehicle. Most businesses do not want to work with someone with any long-term, unpaid accounts. Sometimes creditors will overlook a previous history of late payments if you eventually paid what you owed, but that is not the case with charged off accounts.
A charge off is one of the worst marks to have on your credit report and can make the approval process for future credit more difficult. Additionally, your charged off accounts will stay on your credit report for seven years before they can be removed under the Fair Credit Reporting Act. The best way to move forward is to address and resolve the negative credit account. Work out a repayment plan, reduce your spending and create a budget plan, or look into filing bankruptcy.
Charged off debts can be confusing, especially because the more time that goes by, the more likely it is that the original debt will be sold over and over again to different debt buyers. If you are tired of dealing with aggressive collectors, call Mountain View Law Group today at (801) 393-5555, and set up a free consultation to discuss your options.