What Does Charged Off As Bad Debt Mean

Should you decide to file for bankruptcy its important to include any charged-off debts.

What does charged off as bad debt mean. A charge-off refers to debt that a company believes it will no longer collect as the borrower has become delinquent on payments. After this time most creditors will assume their chances of. Charge-off is an accounting term -thats all.

A charged off account on your credit report will devastate your FICO score. They move the debt from the performing paying and current ledger to the non-performing side uncollectable and they get a tax break for wrting off the bad debt. The purpose of charging off an account is to give the bank a tax exemption on the debt.

A charged off loan or debt is a debt that the creditor has decided to remove from its books as an active collection. Regardless of the type of debt a charge-off means that as a last resort the creditor can decide that the debt is a loss for the company and designate it as a charged-off account or charge-off But that doesnt mean youre off the hook. Simply put the creditor has decided either specifically or based on some internal procedure that the debt is a bad debt and that it isnt collectible.

Once an account has been charged off two things will likely happen. Whether debt is good or bad depends primarily on how you use the money. A charge-off as bad debt reflects poorly on your past payment history.

Even though a debt has been deemed bad and charged off it still exists and can be collected upon. After an account is charged off by the original lender it is usually sent to a collection agency. That does NOT mean they cant keep trying to collect on it.

A Chapter 7 bankruptcy plan can eliminate unsecured debts like credit card debt completely. For accounting purposes it allows the company to write-off a debt. When you hear the term credit card charge off you might think it means the creditor has given up on being paid and you no longer owe any money.