My Debt Was Charged Off! Why are They Still Calling Me? | Summary and Q&A

TL;DR

Debt collectors continue to pursue charged-off debts because the charge-off status is just an internal accounting practice for the original creditor, and the debts are often sold to debt buyers who may file lawsuits or increase collection efforts.

Key Insights

• 💍 Creditors engage in internal collections and involve external collection agencies before charging off a debt.
• 💳 Charge-off status on a credit report does not mean the debt is forgiven or cannot be pursued by collectors.
• 📁 Debt buyers purchase charged-off debts at discounted prices and may intensify collection efforts or file lawsuits.
• 🤝 Understanding the collection cycle and the possibility of debt buyers is crucial when dealing with charged-off debts.
• 🪡 Debtors may need to explore debt settlement, litigation defense, or bankruptcy to address charged-off debts effectively.
• 📞 Internal charge-off is an accounting practice, and creditors can amend it if they receive payment in the future.
• 🪘 A "charged-off" label on a credit report does not indicate the debt is no longer collectible.

Transcript

everybody John Skiba here from the Arizona consumer law group and in today's video I want to discuss a question that I get almost daily in my law practice here in Arizona and that is people are concerned as far as to why a debt collector is still trying to collect on a debt that they know is charged off and to be able to understand why they're doin... Read More

Questions & Answers

Q: Why do debt collectors continue to pursue charged-off debts?

Debt collectors pursue charged-off debts because the charge-off status is simply an internal accounting practice, and the debts can still be collected upon. Debt buyers often purchase these debts and may sue or intensify collection efforts.

Q: What happens during the collection cycle for a credit card debt?

When a credit card debt falls behind, the original creditor attempts to collect internally for a certain period. If unsuccessful, they may involve external collection agencies. If no payments are made after 4 to 6 months, the debt is charged off.

Q: Can a charged-off debt be removed from a credit report?

A charged-off debt remains on a credit report, but it can be updated to reflect a zero balance or indicate that it has been paid. However, the debt itself still exists, and collectors may continue their efforts to collect.

Q: How can individuals deal with charged-off debts?

Individuals can address charged-off debts through debt settlement negotiations, litigation defense if sued, or potentially through bankruptcy, which can eliminate most credit card debts.

Summary & Key Takeaways

• When you fall behind on credit card payments, the creditor may engage in internal collections for a period. If no payments are made, the account is charged off.

• Charge-off status does not mean the debt is forgiven. The creditor may sell the charged-off debt to a debt buyer.

• Debt buyers, such as Encore Capital, Midland Funding, and Portfolio Recovery, purchase charged-off debts for a fraction of their value and may sue or increase collection efforts.