Friday, January 13, 2012

Can Charge Off Accounts Be Sold?

Creditors employ various collection methods. They contact past-due debtors for payment, but eventually charge-off accounts after six months, says Bankrate. This doesn't mean a creditor forgets a debt. Rather, creditors often sell these accounts to other companies, who then attempt to collect the debt.

What is a Charge-Off?

    Charge-offs indicate that a creditor has stopped collection attempts on a debt. This occurs once creditors exhaust collection attempts and feels that a debtor will not send in a payment. Debtors can communicate with creditors to avoid a charge-off. Charge-offs do affect credit scores and stay on reports for seven years. By charging-off a debt, creditors are able to write off the loss on their yearly tax return.

Collection Agency

    When a creditor sells a charged-off account, they often sell these bad debts to collection agencies. Collection agencies own debts after the purchase. If a debtor decides to satisfy the delinquency, he must contact the agency to make a payment. Creditors stop collection attempts after charging-off the balance. However, collection agencies resume these collection attempts and begin contacting debtors by letter or telephone.

Consequences

    In addition to a damaged credit rating after a creditor reports the charge-off, collection agencies report the collection account to the bureaus. In addition, if a collection agency files a lawsuit to receive payment, a judge could issue a judgment against the debtor. This information also appears on the debtor's credit report, causing further damage to his rating. A debtor may resolve not to pay the debt. However, his action can prompt further activity from the collection agency and the agency can perhaps garnishee his wages or seize his bank account.

Considerations

    Collection agencies and creditors do not delete charge-offs if you decide to pay the debt at a later date. In spite of that, paying off an old charge-off can help improve your credit history. Leaving an unpaid charge-off or collection account on your credit history can stop mortgage loan approvals and other financing opportunities (credit cards and auto loans). On the other hand, if you rectify a charge-off by paying the debt, the collection agency can change your current unpaid status to "paid."

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