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Posted: Mon Nov 19, 2007 4:03 pm Subject: Charged off account from Cap1

Does anyone know why Cap1 doesn't want paid? I have a charged off acct w/them and have asked them twice now how to pay it. They keep referring me to the debt collector who WONT validate the debt. What do I have to do???

Posted: Mon Nov 19, 2007 4:08 pm Subject:

Jo, if this acct is charged off then Cap1 can't accept money for it as they have showed it as a loss. More than likely, they have sold this debt to a junk debt buyer! I would send out another dv letter asking for validation and check ur credit report.
Hope this helps,
Ang

Posted: Mon Nov 19, 2007 5:49 pm Subject:

Sorry Ang, I've got to disagree. "Chargeoff" is just an accounting term that means the account was charged against a loss reserve. An OC does not have to sell their accounts just because it was charged off, and if they choose to keep it then they can in fact accept payments on it.

A lot of times it is just their corporate policy that once they send it out for collections/lawsuit, they will not deal directly with you anymore.

Jo - have you disputed the account with CA via certified mail? Maybe you can send a letter to Cap1 telling them the CA won't explain your balance, and you refuse to pay unless they outline it for you.

Posted: Mon Nov 19, 2007 6:05 pm Subject:

I have to agree with debtcruncher. Just because a debt is charged off it does not mean that you don't owe it. In my opinion it should mean that but it doesn't. You should send a debt validation letter to the CA via certified return receipt mail. They are required under the FDCPA to validate the debt within thirty days. You are also required to ask for validation after their first contact by mail. Not after you receive a summons. I see too many people that wait until they have to go to court. Not good. That is too late! Stop it from the get go!

Posted: Mon Nov 19, 2007 6:08 pm Subject:

Yes frog i know u still owe it but i thought once it was charged off then it no longer could be collected on by the OC??? Guess i was wrong! Thanks for clearing that up for me... So, they can report this as a loss yet still collect on it???
Shocked

The only personal expreience i have with a charge off was sold to CACH... so guess i just assumed they all worked the same way!
Thanks for the info DC!
Very Happy

Ang

Posted: Mon Nov 19, 2007 6:15 pm Subject:

Ang! I was told that if a creditor charges off a debt they are not allowed to collect it. When I went to court the mediator said they can either collect it, sell it, or take it back and collect it. It does not make sense to me. I guess they have the option of reversing the charge off. I do not get it!

Posted: Mon Nov 19, 2007 6:17 pm Subject:

See frogman that's what i thought! If it was charged off then how can they then come back and collect on it?? I work with accounting and i know when we charge something off we can not then come back and collect on it....
I'm confused too!
lol
(nothing new)
Wink

Ang

Posted: Mon Nov 19, 2007 6:30 pm Subject:

I'm really confused. I have to start dealing with my charge offs next year and am not looking forward to it.

Posted: Mon Nov 19, 2007 8:06 pm Subject:

I'd really like to understand this better DC! As i was thinking about this, in the many years we've owned a storage facility i've only ever had to write off a debt one time... but what puzzles me is this... once i wrote the debt off of my books it became a profit loss... so if in turn the customer would send me payment where would i then apply it??? since their acct now shows as a loss of income on my books...
Make any sense? I'm totally confused now!
Looks like so are many others!
ha ha
Ang

Posted: Mon Nov 19, 2007 8:17 pm Subject:

A company usually charges off a credit card after 7 months of non payment or 7 months of not meeting the min payment due. At that time they can leave it in house and try to collect on it or they can sell it to an outside lender (collection agency), once it is sold the orginal creditor can't try to collect on it anymore. I'm not sure at what point they decide to sell it. If they've not sold it they can take the payments I think it comes off their "total write-offs" balances rather then just your account. If Cap 1 won't take the payments, sounds like they've sold it. You would need to contact the new lender. good luck with that.

Posted: Mon Nov 19, 2007 8:37 pm Subject:

Ang, you may be referring to a 'writeoff', which is a direct expense and shows up on the P&L statements.

However, (at least in terms of finance companies) chargeoffs are completely different. Chargeoffs are not a direct expense, they affect the balance sheet rather than the income statement.

You say you work in accounting, so I want you to picture accumulated depreciation against furniture/fixtures, for example. Furniture is an asset, and the accumulated depreciation recorded is a contra-account that affects the net realizable value of that furniture.

Loan loss reserves act very much in the same way. Based on historical data, a finance company estimates how much of its receivables will go bad every year, and then sets up a loss reserve (contra) against the receivables balance (asset). It then 'estimates' bad debt every month in a very calculated fashion, the same way it records depreciation.

When an account is charged off, it is not expensed but charged against that loss reserve. The entry would be a credit to Contracts Receivable (asset) and a debit to the loan loss reserve (contra-asset). In essence, that entry is decreasing their reserves. So, a chargeoff is not actually being recorded as a loss at the time it is charged off, because the overall company losses were already estimated in advance and recorded at the end of the previous year. I guarantee you, this follows all GAAP principles.

If a company is able to collect on a charged off account (or by selling the account), the payment would then credit back the loss reserves.

I also have a few other posts regarding chargeoffs:
http://www.debtconsolidationcare.com/settlement/chargedoffdebt.html
http://www.debtconsolidationcare.com/settlement/accounting-term.html

Let me know if you have other questions.

Posted: Mon Nov 19, 2007 8:40 pm Subject:

Ang you posted again in the time that I was writing my post above.

In a small company, it wouldn't make much sense to setup a loss reserve. So I can imagine you would directly expense it as a loss. In the case you receive payment after you wrote it off, you could setup a "recovery" (income) account, and you would then record it as income in the year you receive it.

Posted: Mon Nov 19, 2007 9:22 pm Subject:

Ahh got ya DC! Whewwwwwww... thanks i DO understand this totally! Ur right i DID write it off as a loss in my PL...
Thanks so very much for the explanation, totally makes sense to me now.
Very Happy

So now back to original posters question, sorry to hijack ur thread Jo! If Cap1 refuses to accept payment but sends Jo to the CA then i'd guess she needs to have this debt validated by the CA...
Good Luck Jo,
Ang

Posted: Tue Nov 20, 2007 6:19 am Subject:

Has the op tried sending payments directly to Cap 1 payment center. Lots of oc's won't talk to you anymore after charge off,but I have yet to see one refuse a mailed in payment provided the debt is still owned by them.

Posted: Sat Dec 22, 2007 4:00 pm Subject:

This is the thing: Cap1 reports the chrg off 2 all three bureaus, but is not collecting the debt; I'm presuming it was sold because ALL the ca's keep inquiring and sending me notices, but I keep replying with a vod letter. They won't validate. As I said, Cap1 refuses to work with me. I'm not paying the astronomical fees or even a portion of them to a junk debt company! AND get this, I believe Cap1 is reporting wrong info as to dates of last payment and activity and has stretched the SOL farther than what it should be. Ex: Cap1 said date of last payment was 2005 and I know I didn't make a payment in 2003, 4, or 5. How can I get them to verify this info thru the bureaus? THANKS!

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