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.

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 goes beyond one or two creditors, you may need a solution to a bigger problem. If so, 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.

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