In the process of trying to collect a debt, a debt collector could use many intimidating terms to get you to pay your bill. The term "charge-off" is thrown around by debt collectors and often frightens consumers who owe money. Even if one of your debts is charged off, it does not eliminate the debt and the creditor could still try to collect it from you with a lien.
Charge-Off
A charge-off is simply an accounting term that means the creditor is writing off the amount of the debt on its taxes. The creditor writes the account off to bad debt and then gets to take a tax deduction for the year. The amount of the debt written off is equal to the amount of the tax deduction that the company gets. This lowers the company's taxable income, which in turn, also lowers the tax liability for the company for the year.
Collecting After Charge-Off
Although a company is technically writing off the account to bad debt, this does not mean that the debt is no longer owed. Instead, it simply means that the creditor is taking a tax deduction in the expectation that you will not pay. However, this does not remove the debt and the creditor still has the legal right to try to collect it from you. In some cases, the creditor will sell your debt off to a collection agency to try to collect.
Placing a Lien
When a creditor has a debt against you that you are not paying, it has the right to file a civil lawsuit against you. After the lawsuit is filed, the creditor can get a judgment for the debt. Once the judgment is in place, the creditor has the option of using that judgment to place a lien on your property. A lien can be placed on your property, which makes it impossible for you to sell the property without first paying the creditor.
Statute of Limitations
In this situation, it is important to know the statute of limitations for debt in your state. The statute of limitations is the amount of time that creditors have to collect a debt from you. If the statute of limitations is expired, the creditor can no longer try to collect from you or place a lien on your property. The statute of limitations varies significantly from one state to the next. Some states have statutes of limitations of five years or less while others have statutes of longer than 10 years.
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