If a debt is charged off by a creditor, do I still owe it?

A New Jersey Debt Relief Lawyer Explains Charged Off Debts

It is a common misconception that "charged off" debts are those upon which creditors have given up collection efforts. However, that is not the case. If a creditor charges off (or writes off) a debt, it does so for accounting purposes, not because it forgives the debt. This accounting move means the creditor acknowledges that the debt may not be collectible in the short term, but this does not eliminate the debtor's obligation to pay. In many cases, creditors may still pursue payment through collection agencies or legal action. Additionally, a charged-off debt can continue to impact the debtor's credit score and credit report for years, reflecting a history of non-payment.

When Do Debts Get Charged Off

This usually happens about six (6) months after you default and marks a transition in how the creditor deals with the outstanding balance you owe. From there,e 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 it 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 file suit. Don't be lulled into a false sense of security.

Understanding When a Debt is Forgiven

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

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