What is a Charge Off?

A charge off is a declaration by a lender, generally for tax purposes, that a particular debt account and amount is unlikely to be collected. This typically occurs when an individual becomes severely delinquent in repayment of his/her debts. The lender reports to the credit bureaus that it has taken a loss, but the borrower is still technically responsible for paying back the debt. Otherwise this is also known as a “write-off” or “tax write-off”.

Do Creditors Still Pursue Collections for Accounts that are Charge Off?

Yes, creditors can still and often do pursue collection activity even if a given debt obligation has charged off. In fact, in some scenarios you might be able to get a better settlement deal pre-charge off just right before a creditor has essentially given up hope on collecting on the debt. Each situation is different from the next, however just because an account is in a charged off status doesn’t mean you no longer owe the debt. You are still are technically liable even if a creditor has taken a tax loss on the debt, so they have it within their rights to pursue collection on debts that are still outstanding.

How Do Charge Off Accounts Show on a Credit Report?

Before an account becomes charged off they will go into a 30-day, 60-day, 90-day, 120-day, etc., late status on the credit report. At the time credit reports will typically show CO for charged off status. In this scenario the account will no longer accrue interest. However, the account will be marked as past due and this won’t change the status even if the account is full settled and paid off. Unless of course there is a pay for delete as a part of the settlement on the account.

No More Interest Accrual

Charged off accounts stop accruing interest, so the balance on a charged off account should remain the same so long as the debt stays in a charge off status. Accounts should stay in a charged off status unless you make a payment that gets applied towards a debt and has not be settled. Re-activating a debt can also re-activate interest charges so it’s important to be mindful on not doing so.

Re-activation of Debt

Debt gets reactivated if you apply a new payment to it. So, in many scenarios paying on a debt without a settlement in place is one of the worst possible things you can do. Doing so will also reactivate the statute of limitations on the debt. Re-activating the statute of limitations could potentially renew the cycle for debt collectors to annoy you in collection of the debt and that is typically the last thing you want if you want to eliminate and get out of debt.

Settlement

Settling charged off accounts is typically an opportunity to get out of debt for less than the balance owed. There are different strategies you can use but when it comes to debt settlement the best strategy is often times the simplest one. Simply explain your situation in a candid manner and see what the creditor can do in terms of options in helping you get out of debt. Otherwise you can also look towards joining a debt relief program.