What Does a “Charge-Off” of My Credit Card Account Mean?
At first glance, the term “charge-off” kind of sounds like the balance is gone, done, eliminated. Nothing could be further from the truth. Here is what a charge-off status means for your credit card debt.
A charge-off means your account is delinquent and the credit card company is viewing it as a business loss. In other words, they’ve figured out that you aren’t going to be paying them anytime soon and it’s sort of an in-house shuffle of your account to a different status or department. Typically, a bank will only charge-off an account after several months of not making at least the minimum payment. Many credit card companies do a charge-off after 180 days or six months of delinquency and attempts to collect.
What Happens After a Charge-Off of Your Account?
At least two things happen after a charge-off that directly affect you.
First, moving the account to charge-off status allows the bank to sell the debt to a debt buyer or bring in a debt collection agency to try to collect. In other words, the bank is done trying to get the money from you and it’s time to bring in the “mercenaries”. When the bank sells your debt to a debt buyer or third party debt collector, it typically sells it for much less than the balance owed. Just because the debt buyer paid less than the face amount, however, doesn’t mean they will be any less aggressive in trying to collect the full amount. For all practical purposes, you will now be dealing with the company that bought your debt from the bank. They may start contacting you right away, or wait months or even years.
The second thing that happens is that the charge-off is reported to the credit bureaus and appears on your credit report. It may stay there for as long as seven years.
What Should You Do if Your Account Has Been Charged-Off?
If your account has been charged off, you are at a critical fork in the road and your next move counts. It is likely that the new debt buyer is going to get very aggressive in trying to collect against you. Even if you don’t hear from them right away, chances are they are lying in wait until your credit report shows some activity that leads them to believe you have some money somewhere. Either way, you’ll probably have to deal with them sooner or later.
But the charge-off status also presents an opportunity. A skilled attorney negotiator can use your legal position and leverage to confront the debt buyer and settle the account for a fraction of the balance. In fact, when done right, this can be a very opportune time to negotiate a favorable settlement. If done wrong, or the opportunity is missed, it can lead the debt collector right to your bank account or even lead to garnishment of your wages.
If your credit card account has been charged-off, and you are struggling with debt, please contact our firm for a free consultation with an attorney. You have options and this is a great time to learn about the strategies that can get you out of debt without bankruptcy.