What Constitutes Activity in a Charged-off Credit Card Account?

If you fail to make timely payments on your credit card, the creditor may eventually consider the account uncollectable and charge off the account. Credit reporting agencies must remove credit card debt from your credit report seven years after the account is charged-off.

Charge-Off Defined

A charge-off occurs when a creditor determines that you are not likely to pay your debt and reports your account as a loss. Although your debt was charged-off, it remains collectable and is not forgiven.

Account Activity

If the original creditor sells your account to a collection agency, the agency must maintain the original charge-off date. However, making a payment on a previously charged-off account or acknowledging the debt to the creditor in writing may reset the reporting time.

Charge-Offs and Debt Collection

Charge-offs are an accounting technique. While an account is generally charged off within 180 to 240 days of the last payment, the debt may still be collected until the statute of limitations in your state expires. The debt may also be reported on your credit report until the seven-year reporting period expires.

Statute of Limitations

Federal law defines reporting periods for appearance on credit reports. However, each state has a statute of limitations for credit-card debt, varying from three to ten years. This defines how long a creditor may attempt to collect a debt through the legal system. After the statute of limitations expires, the creditor may continue to pursue the debt, but is prohibited by the Fair Debt Collection Practices Act (FDCPA) from filing a lawsuit. If a creditor violates the FDCPA, you may sue for up to $1,000 in compensatory damages.

Responding to a Lawsuit

If a creditor sues you after the statute of limitations has expired, you must file a formal answer to the lawsuit. In your answer, provide documentation and indicate that the statute of limitations has expired. If this can be confirmed, your case must be dismissed. Failure to answer may result in a default judgment, which is difficult to reverse.