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A
charge off is the term that creditors use when
they determine that they are not able to collect a
debt that is owed to them and they write that debt
off as a loss against their income taxes.
The act of creating a charge off balances the
creditor's books, but it does not let the debtor
off the hook. A charged off debt is not a
"forgiven" debt. The money is still owed and the
creditor will usually turn that debt over to a
collection agency or a lawyer to effect
collection.
A charge off usually occurs when a debit has gone
without payment for at least a period of six
months and the debtor has made no attempt to work
with the creditor to negotiate new payment terms.
Once the charge off occurs, the debtor's
credit bureau is notified and the charge off
is recorded as a negative entry.
Having one or more unresolved
charge offs usually results in the debtor
being denied credit by other lenders. It can also
affect the
interest rate that other lenders charge on
current debts even if those lenders were not
impacted by the charge off themselves. |
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