Don't think that you've escaped a debt simply because a creditor chose to charge off the account. A charge-off merely means your creditor took a loss and wrote off this loss on the company's taxes. You still owe the money, and creditors can legally take action to obtain these funds.
Specifics of a Charge-Off
Charging off accounts is a standard practice if a debtor's payment is past due by 120 to 180 days, according to Bankrate. At this point, creditors have assumed the borrower has disregarded the debt and has no plans to satisfy it, so the creditor writes off the debt as a loss for tax purposes. Creditors might reduce collection attempts once they charge off an account, or they may forward the charged-off account to a collection agency and let that agency handle the debt. Charge-offs stay on credit reports for a period of seven years -- even if a debtor decides to pay the debt.
Lawsuits
Creditors can take further action to get a charged-off account paid by suing debtors in court. Not every creditor goes to such lengths to collect on a debt, but some creditors are relentless. They may take legal steps to obtain a judgment order from the court against debtors. If the creditor is succesful in obtaining a judgment order, it causes further damage to a debtor's credit rating, because a judgment remains on a person's credit report for seven years.
Garnishments for Old Debts
Wage garnishment is a possibility even if the creditor has charged off the account and it remains unpaid. Charge-offs don't erase the liability, and once a creditor receives a judgment order, it can take additional steps to recover any funds still owed. If a debtor refuses to pay a judgment, the creditor can ask the court to grant a wage garnishment order. The garnishment order is delivered to your employer, who must withhold wages from your paycheck as specified in the garnishment order. Federal regulations limit the amount that can be garnished to 25 percent of your disposable income, but garnishment can continue until the creditor regains the total amount owed.
Considerations
Paying a creditor what is owed can stop any wage garnishments and any other action used to collect a debt. Communication with the creditor regarding the debt helps prevent the situation from spiraling out of control. Debtors must demonstrate a willingness to work with creditors to resolve past-due balances. Options such as negotiating a debt settlement -- in which a creditor agrees to accept less than the amount owed as payment in full -- or a modification of the loan terms can help debtors manage past-due accounts. This can avert charge-offs, lawsuits, judgments and garnishments.
0 comments:
Post a Comment