Yes. It is a common misconception that "charged off" debts are those upon which creditors have given up collection efforts. That is not the case. If a creditor charges off (or writes off) a debt, it is doing that for accounting purposes, not because it is forgiving the debt.

When Do They Get Charged Off?

This usually happens about six (6) months after you default, and marks a transition in how the creditor is dealing with the outstanding balance that you owe. From there it will most likely refer it to a collection agency or sell it to a factor (a company that buys debt at a discount and then collects the debt for a profit).

Debts continue to be collectible despite what a credit report might say until a particular state's Statute of Limitations bars it from being collected in court. Then you have some defense against the collection of old debt. Until then, the collectors will still call, and the lawyers can still file suit. Don't be lulled into a false sense of security.

How Would I Know If They DID Forgive It?

If a creditor were truly to forgive the debt, you would have received a 1099 for debt forgiveness income because the IRS sees that as taxable! Not exactly good news! Debts that are charged off on your credit must still be listed in a bankruptcy, so that they can properly be discharged.

Want more information on how to deal with your creditors and resolve your debts? Then download my free book, The Biggest Secrets Your Creditors Don't Want You to Know. Become empowered, protect your rights, and get back on a good financial footing!  Are you a visual learner rather than a reader? Do you enjoy watching YouTube to learn new things? Then check out my 3-part video series on how creditors use lawsuits in New Jersey to collect debts. Just click here for more information on how to get the links!

But if your debt situation goes beyond one or two creditors, you may need a solution to a bigger problem. If this is the case, then download my free book, Am I In Too Deep? A Guide to Knowing When You Need to File Bankruptcy in New Jersey to find out if bankruptcy might be the solution.

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Steven J. Richardson
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Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.