Charge off debts, credit report, collection : Bad Credit Advisor

Charge off debts, credit report, collection

With the looming credit card crisis, the time is ripe to revisit a sour subject of charge off debts, including how they affect credit report, what is the reporting time limit, how debt collectors go after it and what exactly charge off debt is. Will start from the end. Charge-off is simply a write off of severely delinquent (six months of non-payment) debt. The creditor no longer counts charged off debt as an asset and gets a tax break as it is a loss or rather a cost of doing business. You still owe the money, of course, which is often sold to third party debt collectors for pennies on the dollar, and your credit report gets a negative record. Charge off, while is not the end of the world, is quite a derogatory account.

So your credit report will show CHARGE OFF for at least 7 years - that is reporting time limit notwithstanding what anyone else says, and the debt is still legally very valid, and the creditor can attempt to collect the full amount. Again, it will be either a debt collection agency which purchased the charged-off debt, or a in house collection department. And if the amount is reasonably large, the creditor is likely to file lawsuit against you.

So what are your options? Simply paying an old charge-off doesn't not remove it from your credit reports. It will be changed to a PAID CHARGE OFF, which, while slightly better, is still a seriously derogatory item. Instead, try to negotiate the removal of a charge off record in return to the payment which you feel you can afford. See this charge off negotiation letter. If you can't pay or don't feel like it - after all it is all their fault, check your state statute of limitations on debts to see how long a debt is considered legally collectible. In general, the limit is about 4 to 6 years from date of your last payment. After that any filed lawsuit can be tossed out of court. To make totally sure what statute of limitation is in your state, contact the Office of the State Attorney General.

If you are positive that your charged off debt has expired under this statute of limitations and a collection agency still calls you, you should do and know the following -
- explain to the agency that you will pay only if you are taken to court and a judgment is obtained against you, otherwise, you have no intention to pay what you believe to be a legally noncollectable debt
- put this in writing, adding a clear demand that the agency stop contacting you, which is often called cease and desist letter
- the Federal Fair Debt Collection Practices Act declares that if the state statute of limitations period is up, the agency may not contact you again once it receives your letter, except to say there will be no further contact

Here are two things that you absolutely must not do with charge off debts -
- do not allow debt collectors to talk you into using post-dated checks, or providing your checking account details over the telephone as both normally lead to bounced checks and even worse financial problems, instead make payments via cashier check or money order
- do not make payments based on a verbal arrangement, but get the agreement in writing, signed by a creditor representative with an authority to approve the workout plan

Wed Oct 29, 2008 03:10PM by Tony | More in Credit Repair | Comments (0)

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