My Debt Was Charged Off. Do I Still Owe It?

Charged off not equal to Debt forgiveness

If you have reviewed your credit report and see that an unpaid debt shows “Charged Off”, this doesn’t mean that the debt is now gone. It is a common mistake that many people make thinking that when the debt reflects this status (Charged Off) that it’s been cancelled by the creditor, all is forgiven and the debt has disappeared forever. This isn’t true. You still owe the debt. “Charge Off” is an accounting term that means the debt has been “charged off to profit and loss”.

Banks and credit card companies are legally required to remove delinquent accounts from their books after 180 days, or six months. That does not mean, however, that the debt is no longer valid. At this point the account is usually sold to a debt collector for further collection efforts. The charged off debt is still an obligation, will affect your creditworthiness, and can cause you to be ineligible for new debt.

Charged off debts also often cause confusion on your credit reports. Charged off debts are sold from one debt collector to another, resulting in numerous entries on your credit bureau reports and multiple organizations contacting you for payment. A charge-off remains on your credit report for seven years from the date it was charged off.

A lawsuit can be filed to gain a judgment against you which then opens the pathway for the creditor to garnish wages, etc. Filing bankruptcy stops all collection at whatever point in the debt collection process your debt is in at the time the bankruptcy is filed. The debt is then wiped out by the court and cannot be collected.

Disclaimer: This blog is intended as general information purposes only, and is not a substitute for legal advice. Anyone with a legal problem should consult a lawyer immediately.

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