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A Charge Off Is a Bad Thing For Your Credit

If you are late on paying a debt payment for over 90 days, you may see a label on your debt as “charged off”. This type of “charge off” label on a debt is not a positive mark. Many people falsely believe that a charge off means the debt has been charged off of your record and you are no longer responsible for the debt, but this is definitely not the case. Charged off debt means that the organization that owns the debt, your creditor, is no longer counting on the money to come in. It is a change in the designation of the debt by the creditor’s accounting practices. Debt that has been charged off by a creditor can be counted as bad debt that can be written off as a loss in the accounting books of the creditor to which the debt is owed.

The most important thing to not about charged off debt is that it can still be collected upon. Although a debt has been signified as charged off on your credit report, this does not mean that the original creditor or an agent of the original creditor can’t collect the debt from you. They have the right to continue with collections activities to try and pursue the debt amount along with other charges incurred from the outstanding debt or the cost of collection. This means that the debt can also be sold to another organization and collected against you. When the debt is sold to another organization like a collections law firm, this law firm can act as the new owner of the debt and pursue collections against you. A debt is sometimes sold for pennies on the dollar to other organizations (which are sometimes law firms) that have taken a gamble at buying the debt and attempting to collect on it. As the new owner of the debt, they can take you to court and get a judgment against you which eventually gives them the right to start a wage garnishment or bank account levy.

A bankruptcy can eliminate debt whether it has been designated as charged off debt or not. Even if the debt has been charged off by the original creditor and the new collections organization is now collecting on it, the debt can be discharged and collections activities will no longer be a risk to you. A bankruptcy can also stop collections activities like wage garnishments and bank account levies from moving forward even if a judgment has been granted to the creditor or the collections agency.



Bankruptcy Law Professionals is a bankruptcy law firm based in the Central District of California including San Luis Obispo County, Orange County, Santa Barbara County, Ventura County, Los Angeles County, Riverside County, and San Bernardino County.  Our offices are located in Orange County and Riverside.  Contact us at 855 257-7671 to schedule an in-person or phone consultation.

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