My Credit Report Says Some Debts Are “Charged Off”. Do I Still Owe Those Debts?

28 Jan My Credit Report Says Some Debts Are “Charged Off”. Do I Still Owe Those Debts?

Yes. You still owe the charged-off debt. Many people mistakenly believe a creditor does not want to collect a charged-off account. Wrong-o! A charge off is merely a bookkeeping entry. It does not affect your obligation to pay. When it becomes apparent to your creditor that you are not paying and are not going to pay any time soon, then the creditor must “charge off” the loan. Usually that happens 6 months after you default-you stop making payments on that debt. The creditor stops posting interest or late fees to the account when the loan becomes nonperforming and the creditor is not getting paid.

All defaulted debts are charged-off, then are sent to either a collection agency or sold to a debt buyer. Sometimes these debts are sold several times to investors who will try to collect the account years later. People who rely on their credit report for information may be lured into a false sense of security if the debt says “charged off”. Common sense should prevail. A person should know if a debt was paid. Typically, out of sight out of mind controls how one perceives finances. And far too often the squeaky wheel gets the grease. When it comes to spreading too little money around too much debt, usually one pays the creditor that imposes the biggest threat, whether that by garnishment, lawsuit or persistent aggravating phone calls. A debt that has been charged off often goes inactive for a short while as the creditor removes the debt from the regular monthly billing scheme. Soon enough, that the debt will appear in the hands of a debt collector or third party debt buyer, who contacts you for payment.

If you have charged off debts on your credit report you should include those debts in your bankruptcy case.

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Andy Miofsky, Esq.

Andy Miofsky holds the highest AV PREEMINENT rating from Martindale Hubbell Law Directory and a perfect 10.0 from AVVO. Andy is an Illinois consumer rights lawyer with offices in Granite City Illinois. Andy represents people with bankruptcy and student loan debt problems throughout the Southern District of Illinois since 1979.
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