One of the most frequent calls we get at our office is, “What does it mean when it says, “charge off”? Do I need to list this on my list of creditor’s?”  The answer is always “yes”!

As you are perfectly aware, once you owe a debt, the creditor will relentlessly try to collect the money that you owe them.  Although certain laws govern how far they can go trying to collect a debt, we know they will call, send letters, then call again; day after day!  After a certain amount of time (this will depend on the company policy and practices) after being unable to collect the debt the creditor is going to “charge off” your debt.  This is done primarily for their tax purposes; they are telling the IRS that they have just chalked it up that you have no intention of paying off that debt.  It’s a loss in their books for accounting purposes.

Does that mean that you no longer owe the debt?  No!  Just because they charged the debt off doesn’t wipe away the fact that you still owe that company money.  They can charge your account off and still attempt to collect the debt.  More likely, they can transfer or sell the debt to a collection agency for pennies on the dollar and the collection agency will then try to collect on the debt. There are companies that actually make a living off of buying “bad debt” and then trying to ruthlessly collect on that debt to make money.

Remember, a charge-off is really just used for “bookkeeping” purposes; it has nothing to do with the fact you still owe money.  If you are completing your bankruptcy, we strongly suggest you list all of your debts including those that state they have been “charged off”!