186. What is a Charge-Off and What Does it Mean for My Financial Situation?
Are you concerned about what to do about a charged off debt? Maybe you saw a debt marked as charged off on your credit report. This does not necessarily mean that you do not owe the debt anymore, so be careful. You also should be aware of how a charge-off works if you are in a bankruptcy or plan on filing one.
So, What is a Charge-Off?
A charge-off typically results when a creditor has deemed a debt as a loss that they are unable to collect. The creditor hires or sells the debt to a collection agency. The collection agency will now pursue you for the debt. You will most likely receive phone calls and letters to collect the debt. If they do not receive money from you, the agency could sue you instead to collect on the debt. However, there is a time frame under which a charge-off can occur.
When a Collection Agency Cannot Collect
Since there is a limited amount of time that a collection agency can collect on a charged-off debt, it is important to speak with your attorney about any contact you have had with a collection agency. Every state has its own statute of limitations, or time limit, on when they can collect on a charged-off debt. “In California, most credit card companies and their debt collectors have only four years to do so (NOLO).” Once the statute of limitations has passed, you are no longer legally liable for paying the charged-off debt. This will apply to both personal and business debt. There are serious repercussions for not appearing in court if you have been served on a debt. The court will rule against you if you do not appear to say that the debt has expired.
Charged Off Debt During Bankruptcy
Regardless of the chapter under which you file for bankruptcy, you will be required to provide the court and trustee with financial accounting. You will include all the debts that appear on your credit report, including ones marked as charged-off. If you do not list charged-off debts, there is a possibility that they will not be discharged in your bankruptcy. Speak with your attorney in detail about your finances and debt before filing to ensure that your debt is properly addressed in your bankruptcy case.
Need More Information?
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