Written off debts

HI boyyippee, welcome to the forum!

Okay, this is the best way I can describe it. When you borrow money from a company or obtain credit, you create an expectation of future income when the debt will be repaid. That's an asset of the corporation.

When a company 'charges-off' a loan, they're saying that they don't believe that they'll ever be able to collect the debt. So they 'write-off' the asset. It's an accounting entry that reduces their profits and taxes. This does not take away from the fact that you still owe them the money.
A charge off just 'zeros' out their ledgures for tax purposes, they write you off as a loss.

I understand what the purpose of writing off the debt is, it's just that if sell a debt to someone else, how in the world could you not pay the taxes on it by writing it off? This is not my debt, I'm just wondering about this kind of senario.

In context of debt and credit, charged-off means the debt is not collectable, creditor can sell the debt, but they have to report it as zero balance if they sell it. When creditors report a debt as charged-off they might get some deduction in their income tax. However, if the debt is collected in future, it is adjusted with the tax return.

???Write-off' means the debt is discharged. Hence no collection activity should be applied. IMO, written-off debt can never be sold. The part of debt that is written off becomes an income for the debtors and debtor should pay tax for it. Hence creditor should cease all collection activities. Hope I was clear with this.

About ten years ago a credit card company wrote off a debt i had with them. Now a collection agency has contacted me wanting to collect. Can they do this?

Yes, but it sounds like it would be way past the statute of limitations, meaning that they couldn't sue you for it legally. If you make a payment it would restart the SOL making it no longer time barred. If you intend to pay it make sure you get it in writing and make sure you can pay it all at once with a payed in full letter following payment.

See - this is the problem I'm having.

The original creditor charged off the debt in 11/02. They say I made a payment in 2/03 - and then they sold the debt in 4/04.

Why would I have made a payment on a charged off debt? I know I didn't, but why do they even think that they can convince a judge I did? It makes no sense.

theresa--what state do you live in?

So are you saying that it is showing payment activity when there was none?

I'm in Missouri, and yes, they're saying that I made a payment I didn't make.

Is this reporting on your credit reports?

Yup. It's showing up as a KD - "Key Derogatory" - for the last 24 months (as far back as the credit report goes).

They mark the KD when no payment has been made, and since they are not the original creditor they cannot say you are late on a payment. I'm guessing since your viewing KD's your probably using freecreditreport.com, you should try to use annualcreditreport.com, that site is made available by the federal trade commission and allows you to view for free your credit reports from the 3 major credit reporting agencies 1/year as provided in the Fair Credit Reporting Act.

Quote:

Well what Stanley wrote is not true..maybe in accounting sense but not in the real world sense.

Write off does NOT mean discharged. Written off means that is written off the companies good debts and moved to the bad debt ledger. The debt is still owed and valid.

Have you received a summons? Have you send a debt validation letter, making them prove that they have the right to legally collect the debt?