My Credit Report Says A Debt Is Charged Off. Do I Still Owe The Debt?

Yes, you still owe the debt. Many of our clients come to us after they have been sued by a debt collector. The debt collector purchased the debt from the original creditor for pennies on the dollar and is now attempting to collect the debt. Usually our client would have attempted to make payment arrangements when they were able, but they mistakenly thought that no one was going to try and collect the debt, as it had been “charged off”.

What is a charge off? It’s really just an accounting entry by a creditor. After a few months of nonpayment, a creditor will determine that they are unlikely to receive any further funds and will stop posting interest and penalties to the account. This does not absolve the consumer’s legal liability to pay the debt.     

After an account is charged off, it will be sent to a collection company or sold to a debt collector. In fact, it may be sold multiple times. Eventually, a collector is likely to harass you or ultimately sue you to try and recover the debt.

If you have to file bankruptcy, you will want to include any charged off accounts in your petition to ensure you are not later contacted about the same debt.