Charge-Offs – Avoid This at All Costs

Being late paying your bills is not unusual and happens to the best of us. If a situation arises where you suddenly cannot pay your bills – loss of a job or a medical emergency – it is important to understand just what will happen if you find yourself delinquent on a loan or other debt. If you are late on paying on an account and have not contacted the creditor to work things out, it will eventually get turned over to a collection agency. If the account remains unpaid – even if there is a dispute over the debt - it will be flagged as a charge-off after about six months of non-payment. While this is not the same as having foreclosure or a bankruptcy on your record, this puts you in the same “club”. This is something to be avoided at all costs. It is called a charge-off because corporations see it as a bad debt and charge it off as a business expense for tax purposes. While they might write it off it is still legally collectable and the collection agency will still pursue you. If the debt is a considerable amount, say $2,000 or more it is possible that the company will file a lawsuit to collect. Even if You Pay it Off The reason to avoid having a debt go to this status is that event if you pay off the debt the charge-off will remain on your credit report for seven years. Still, it is better to have a paid charge-off than an unpaid one. So if it happens to you, take action. If the charge-off is legitimate – you owe the debt and have not paid – work with the creditor directly to broker a deal. Be sure to get everything in writing. The collection agency will not cut you as good of deal – work around them. If you work directly with the creditor you may be able to get the charge-off removed from your credit report by making a partial or full payment. Read How Long Does Negative Information Stay On Your Report?