Debt Write Off Regulations

Debt write-offs are conducted when a company decides that they are most likely not going to receive the funds owed to them. This could be a credit card company that has not been about to collect a debt or a utility company or other institution that has not been able to collect payments.Debt write-off regulations help to ensure that both the debtor and the company money is owed to are treated fairly.

Debt Not Forgiven

If a company writes off a debt, the debt is still active. The company may continue to attempt to secure the funds from the debtor. This can be done in the form of civil suits, collection calls or written notices. This may continue past the time in which the debt is on the person's credit report.

Credit Score Damage

The debt that is written off will be noted on a person's credit report. This will negatively affect the person's credit score. The amount of damage per write-off is not a steady amount, and different circumstances will affect the damage levels. There is no way to have a debt written off without taking a hit to the person's credit score.

Noted for Seven Years

A debt that has been written off will remain on a credit score for seven years. Even if the debt is paid off, it will be noted on the credit report as originally written off. If a debt has been written off in error, the debt and write-off can be questioned and removed if found in error before the seven year mark.

Tax Deduction

Businesses are allowed to use debt write-offs as a tax deduction. These write-offs must be supplied to the Treasury Board and IRS to assert that these write-offs are valid. Debts that have been forgiven due to financial hardship or settlement cannot be used as tax deductions.