Beware of Charged-Off Debts

When in debt, it’s normal for instincts to take over and to look for easy ways to get out of a financial hole as quickly as possible. Sometimes people find themselves in the sticky situation of not being able to pay a debt. When this happens, a creditor may be willing to come to a payment plan agreement or will agree to charge off the debt when it becomes worthless.

This is known as the “specific charge off method.” Although this method seems desirable, it presents issues and people should proceed with caution. It is important to know and remember that when a debt is “charged off,” it does not mean the debt is dead and cannot be recovered. A creditor can still recover the debt from you at a later date.
A creditor or debt collection agency that bought the charged off debt can still make collections. Sometimes a creditor will sell the debt to a third party collection agency that will look to collect the debt at any cost. When dealing with debt collectors, remember that you have rights. Learn about what debt collectors can and cannot do under The Fair Debt Collection Practices Act.
When a debt is charged off, a creditor is required to report it to the credit bureaus. It is best to try to figure out a manageable payment plan with the creditor – you want to get a “paid in full” status on your credit report. If you simply are not able to pay off the debt in question, the debt may be “written off.” However, a written off debt will appear as a bad mark on your credit report for seven and a half years.
Evan Carmicheal offers some tips for consumers trying to negotiate with creditors or debt collectors about charged off accounts:

  • Remain calm and composed in case your debt is charged off
  • Do not give any future commitments or agree to terms you may not be able to manage
  • Try to get the creditor or collector to agree to a small monthly payment to avoid a charge off
  • Do not give them your checking account details
  • Get all of the details and the agreement on paper (get everything on paper, always)
  • If you are not able to negotiate with the agency, the debt is likely to get picked up by another agency and you may have better luck negotiating with them

If you have questions or concerns about debt collection, please call Flitter Milz, P.C., toll free at (888)-688-1225 for a free case review.