Late payments and collection calls are stressful to deal with, especially when you are not in control of your debt or know what options you have in a bad debt situation. - Debt collectors are well aware of their rights and responsibilities and can thrive off the general consumers’ lack of expertise in collection matters. Different terms are often used in debt collection which can lead to additional confusion.
The better you understand the language of creditors, the better you will be able to communicate with them, while still protecting your rights.
A Charge Off is essentially an accounting term and does not mean the debt is going away. The terms charge off and write off are used interchangeably and mean basically the same thing: The lender no longer has confidence they will be able to collect the debt you still owe.
A charge off generally occurs when payments have been neglected for six months to a year. When you miss the first payment, the bank sends the account to its internal collection department. From there, you begin to get calls, sometimes as quickly as a few days late. The two biggest factors impacting when a charge off occurs is the banks policies and your response to collection calls. Lack of response is considered “refusal to pay,” and can lead to a quicker charge off.
After a period of non-payment, the bank determines they will not be able to collect the debt from you and charges off the debt. This means, for accounting purposes, the debt is non-collectable and is now handled differently than delinquent (or late) debt.
Once the charge off is in place, the lender will generally take one of three actions:
- They will send it to an attorney to collect the debt
- Send it to a collection agency (but they still own the debt)
- Sell the debt to a debt buyer
Whoever takes over the account will begin efforts to collect the debt. This stage of collection is typically much more aggressive than the first. As you approach the statute of limitations for a lawsuit in your state, efforts could increase even more.
Debt forgiveness happens after the debt collectors, attorney, or debt buyers have tried to collect from you. They will make a decision to either sue and collect through the court system, or make settlement offers. This could result in years of collection calls, attorney letters, and court cases, if you continue to ignore the problem.
Debt forgiveness is often triggered when you (or a representative for you) make contact with the credit collection agency holding your account. As communication with the agency opens, you are able to negotiate an agreement that is often significantly less than the balance they are trying to collect. When an agreement is reached, you will either make monthly payments or a one-time settlement to put the debt to rest. Once you have fulfilled your end of the written agreement, the creditor will forgive any remaining amount owed. This is referred to as debt forgiveness or debt cancellation. Both terms result in the end of your legally liability for the debt in question.
Debt forgiveness can also occur if you become disabled or file for bankruptcy. This debt is generally called a discharge but accomplishes the same release of liability found with debt forgiveness.
If you face a charge off, instead of suffering through years of collection calls, let a professional help you talk with the debt collectors to gain debt forgiveness for you. This can offer both immediate and long term debt relief.