When you get a credit card or loan, you enter into an agreement with the lending company. As such, when you accrue debt with that company, your contractual obligation to pay the debt isn't null and void simply because you become so far behind on your payments that the debt is "written off" by the company.
Basics
Also known as a "charge-off," this accounting process enables companies to write off bad debt as a loss for tax purposes. Fair Isaac Corporation lists late payments in order of just how late they are: 30, 60, 90, 120 or 150 days. The last category is charge-off -- when your account is in severe delinquency. Specifically, accounts are typically written off when there have been no payments for 180 days.
Structure
You may think the collection calls will end once your debt is written off, but that's not true. Since you still owe the money, collectors have the right to try to recover the amount you still owe. The only difference is, by the time your debt is written off, your original creditor may have sold the debt to a third party. You'll have to work with the company that bought the debt since you'll now owe any outstanding monies to this agency.
Implications
A charge-off is one of the most damaging items you can have on your credit report. It stays on your report for seven years, and during that time, you will have difficulty getting credit of any kind, let alone a favorable rate. In fact, Bankrate reports debt write-offs as the top reason people are declined credit.
Solutions
Though you can't get all signs of the charge-off removed, you may be able to get a "paid charge-off" on your credit report, which is far better than allowing the outstanding debt to remain on your report. You must contact your original creditor or the company who bought the debt and, if you can't pay the debt in full, work out realistic terms. The worst thing you can do is ignore it, because it will remain as a current charge-off until you deal with it.
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