My Charge-off Was Sold to a Collection Agency

When a person does not pay back a debt to the creditor, the creditor will often charge the debt off, declaring to a credit reporting agency that it will not be able to collect on it. While this will hurt the person's credit score, the person may think that it is the last they will ever hear of the debt. However, this is incorrect, as charged-off debts are commonly sold to debt collectors.

Charge Offs

When a company seeks payment of a debt and fails to receive it, it may choose to "charge-off" the debt. This means that it is listing the debt as uncollectible on its balance sheets. It will also report the debt as such to a credit reporting agency, which will likely harm the debtor's credit score severely. However, once a debt is charged off, it does not mean that the company is relinquishing the right to sell it.

Debt Collection Agencies

Many debt collection agencies earn money by buying old debts from creditors. Because these debts are usually not easily collectible, the collection agencies may be able to purchase them for pennies on the dollar. These debt collection agencies then attempt to collect on the debts themselves. Under U.S. law, the debt collection agency has just as much right as the original creditor to attempt to be paid the full amount owed on the debt.

Debt Collection

Debt collectors may take a number of tacts in attempting to get paid for the debt. Among these is filing a lawsuit against the debtor, alleging a breach of contract of the debt contract. If the debt collector wins the suit, he may be able to convince a judge to garnish the debtor's wage or freeze his bank account. However, these debt collectors are not allowed to pass on any costs they incur to the debtor.

Considerations

The collection agency will be able to continue to seek payment until one of two events occurs. First, the debtor may be able to settle with the collection agency, either by paying them off entirely or by convincing them to take a lesser sum in payment. Or, the statute of limitations on the collection of the debt may expire. The length of this statute will depend on the laws of the state in which the debt was incurred.