I overhead a couple of coworkers talking about charge off accounts.
One guy stated that a "charge off" account doesn't need to be repaid back to the creditor because they have received a tax credit on it (claimed it as a loss).
The other said that he had a charged off account that he still makes payments on, basically the account is closed but he still has to pay the balance.
Which one is correct? My DH has a few charged off accounts on his credit report with balances, and I'm wondering if he's still responsible for paying them off, or if they should come off his report.
Each state has different statute of limitations in which the vendor can collect on their debt. Texas, for example is 4 years, so if the debt was from 2001, he would no longer be required to pay. The vendor may or may not continue to pursue the debt, but again, your DH would not be required to pay.
Paying off a debt that has been "charged off" will remove the balance owed, but it will still be reflected as "charged off" on your credit report. This is still harmful when applying for a loan/c.c. so some people don't bother paying it off. When applying for a mortgage, however, they will often require any charge offs to be paid off in full.
This is what I know/understand about charged-off accounts:
* The original creditor has to charge off the delinquent account within 180 days. That doesn't mean they have to stop trying to collect; it just means that they get to write it off as a loss on their taxes.
* The statute of limitations affects how long the creditor or collection agency has to bring a suit. The statute of limitations varies by state. It doesn't affect how long the debt can stay on your credit report--that's seven years, btw.
What I've read (I think on bankrate.com) is that a debtor always has the moral obligation to pay back a debt, but that it might not improve their credit report or FICO score, since a paid charge-off is not looked at any more favorably than an unpaid charge-off.
I hope this helps! It's very confusing, I know. All the credit "laws" seem to defy common sense!
I had an account with MBNA about 7 years ago. I was in college at the time and couldn't make the min. payments. So I let the CC go and have not tried to make a payment in almost two years. I am now worried that they are going to try and sue me at the worst possible moment, in that I am gong to be getting married soon. I dont get phone calls, but I got a letter left on my doorstep that was talking about an arbitrator. It didn't say anything about suing, but I didn't respond to it. I don't know what to do. Do I take my chances and not pay and see about suing or do I try to pay. The amount charged-off is approx. 12,000. Any suggestions?
Charge Off Accounts
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