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Dream Builder | What are Charge-Off's? |
I keep reading people mentioning charge-off's? Some sort of bankruptcy?
Just learning something new everyday ;0
Thanks. |
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Sgt Big Red
 |
The IRS allows creditors to charge off debts that have become worthless. The rule is called the "Specific Charge-Off Method". In a nutshell, this rule allows creditors to take a loss on their income taxes when a debt they are trying to collect becomes worthless. Companies do not actually have to go to court to prove the debt is uncollectible and they can still try to collect the debt at a later date. If they are successful in collecting the debt (or any part thereof) they must claim it on their tax return in the year collected.
Generally, creditors will try to collect the debt for a few months or, in some cases a few years. They either do this through an in-house collection department, or by hiring a third-party collection agency. When they hire debt collectors, the creditor retains legal rights to the account and the bill collector must act on behalf of the original creditor.
Quite often, creditors sell accounts they deem worthless (or not worth their time and expense) to third party debt collection agencies. When they sell the account, they sell all rights to the account as well so only the new legal owner of the account can collect the debt. Once a company decides to charge off a debt they are required to report that information to a credit bureau within 90 days of the debt's charged off date.
Delinquent debts accounts are bought and sold daily so your old account might end up in the hands of a dozen different debt collectors over the course of several years. This explains why you receive out-of-the-blue calls from debt collectors demanding payment on an old forgotten debt. |
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wop p
 |
As the term charge-off includes the term charge, many people think term means cancellation of the account by the creditor. This means you cannot pay for anything with your credit card. But it not what the banks mean. According to banks and bill collectors, a "charge-off" is the point at which the creditor writes off the outstanding debt as a "bad debt." This normally occurs after 6 consecutive months of non-payment. From this point onwards, they do not consider your debt in their books as an asset. As you still owe the money, the creditor will continue their efforts to recover it from you. But the rules of accounting force the creditor to nullify your debt in their accounting books. |
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Faster Gun
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a Charge off is a debt that the creditor (entity that granted credit) could not collect from the debtor. (entity that recieved the credit.) so it is written off their books as a loss, thus 'charge off'.
Accounts receivable that will likely remain uncollectable and will be written off. Charge offs appear as an expense on the company's income statement, thus reducing net income. In general, companies make an estimate of charge off expenses that might be incurred in the current time period based on past records as part of the process of estimating earnings. Most companies make a charge off allowance since it is unlikely that all of their creditors will pay them in full. also called bad debt. |
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Ken E
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when you are off the hook, dont have to ever worry about the debt |
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ALFimzadi
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Usually when a person has been in collections status for 120+, the creditor decides to give up, or sell the debt at a fraction of the cost to at least collect something. |
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Grandpa
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charge offs are when you have a debt and not paid then turned over for collections and never paid then they charge it off the account and it sets on your credit report for 7 years |
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jeh1048
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sort of like when a company gives up on a bill thats owed it. they know they probably cant collect it so they just charge it off as a loss.
at least thats how i've heard it defined |
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WealthOfUselessKnowledge
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It is when a person has a bank account and overdraws it, but never pays the bank back. So the account is closed and the outstanding balance is "charged-off". They are not good, and most times will prevent that person from opening a checking account at another bank.
:) Hope this helps! |
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quantumrift
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Basically it is a debt that a lender (bank, credit card company, etc) writes off for not being paid. If you fail to make payments on a credit card that you own $1000 on, and you default or go into bankruptcy, the lender has to 'charge off' that $1000 off their books. |
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