Charge off

Charge off means bank writes off as bad debt and then sells to collection agency. Many say you can get lower settlements if it charges off and goes to collection agency. It does hurt your credit report a little more though.

CHARGE OFF: A term describing an expense on a company's income statement.
A charge-off relating to consumer debt is a debt that is deemed uncollectible by the reporting firm and is subsequently written off. This type will be classified as 'bad debt expense' on the income statement, and removed from the balance sheet.


After approximately six months of delinquent payments the original creditor ”charges off” the account and will take a tax deduction from their income tax. Just because the creditor is taking a tax deduction, it does not mean that you do not owe the debt.
The original creditor can continue to try to collect the debt. If for some reason you pay the debt, the money recovered is now all income to the creditor to offset the tax deduction taken in the past. This is why charged off debt is usually sold off to third party collectors for pennies on the dollar. That way the creditor never realizes income and the new collector collects money on its investment, essentially a capital gain which is usually taxed at lower rates than income.
“Charge Off” is really just a tax dodge. Meanwhile you still owe the money you always owed and the only thing that might have changed is to whom you pay the debt.

I have a car I have been paying on even though it was included in my Chapter 7 bankruptcy. I have not heard a word from the creditor on this and when I call to make a payment the customer rep always says "This is NOT an attempt to collect a debt". Am I just wasting my money and should I try to redo the loan? I am not trying to get out of paying, but my husband is unemployed and I am the sole provider for our us and our daughter at this time.

Liss

If you do not get any responses you may want to start new thread.

Anyar thanks for the great explanation I was just searching for what "charge off" means.

I am pulling up this old thread b/c there is a question in the Advanta thread about charge off. ALSO..I have to admit this still does not totally answer my question about charge off. If your account is charged off does it stay on your credit report longer AND does it look worse?? Some rep told me from Advanta that it will have something like an R9 status on your credit report and this is something you never want on your CR..of course an ADVANTA rep is not someone I can trust.

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