When debt becomes seriously delinquent, creditors often charge-off the debt. A charge-off means that the creditor deems the debt noncollectable and writes off the account from their profit, but it does not mean that you no longer owe the money.
Significance
Creditors will exhaust all measures to collect your money before marking the debt as a charge-off. An account will generally be marked as a charge-off six months after the day of last payment.
Effects
Once your debt is charged off, it does not mean that you do not owe the money. Charged-off accounts are sold to collection agencies who may proceed to collect account by filing judgements against your property, repossessing collateral, or garnishing your wages.
Consequences
Accounts that are charged-off will remain on your credit report for seven years. A charge-off is one of the most delinquent remarks you can receive on your credit report, and it will impact your credit score and ability to obtain credit in the future.
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