Can Creditors Still Collect on Charged-Off Debts?

TL;DR

Just because a debt has been charged off does not mean you are no longer obligated to pay it; debt collectors can still pursue collection and even file lawsuits.

Transcript

hey everybody in today's video I wanted to talk about a question that I get all the time in my law practice by the way my name is John Skiba I'm founder the consumer warrior project I'm also an attorney at the Arizona Consumer Law Group in Mesa Arizona and a question I get all the time when I meet with people in my law practice is you know if a deb... Read More

Key Insights

• 🪘 A debt being charged off does not mean you are no longer obligated to pay it.
• 🈂️ Charged off debts are often sold to debt buying companies, who may then pursue collection.
• 💳 Credit card companies typically sell their charged off debts to outside debt buying companies.
• 📁 Debt collectors may file lawsuits to obtain judgments and collect on the debt.
• 🈂️ American Express tends to keep their charged off debts instead of selling them.
• 🥳 Debts are typically charged off after 120-180 days of being past due.
• 💳 Charged off debts can still negatively impact credit reports.

Questions & Answers

Q: What does it mean when a debt is charged off?

When a debt is charged off, it means that the creditor has removed it from their books as an asset. However, the debtor is still legally obligated to pay the debt.

Q: Can debt collectors still collect on a charged off debt?

Yes, debt collectors can still try to collect on a charged off debt. They may purchase the debt from the original creditor and pursue collection, including filing a lawsuit.

Q: Do all credit card companies sell their charged off debts?

No, not all credit card companies sell their charged off debts. Some, like American Express, tend to keep their debts, while others, like Discover and Capital One, may sell them to external debt buying companies.

Q: Why would debt collectors file lawsuits for charged off debts?

Debt collectors file lawsuits in order to obtain a judgment, which allows them to garnish wages or levy bank accounts. This is a common tactic used by debt collectors to collect on unpaid debts.

Summary & Key Takeaways

• Charged off debt is an accounting term used by creditors to remove the debt from their books, but it does not relieve the debtor of their obligation to pay.

• Debts that are charged off are often sold to debt buying companies, who may then file lawsuits to collect the debt.

• Credit card companies usually sell their charged off debts to outside debt buying companies, while some companies like American Express tend to keep their debts.