When you encounter a question like this: “Am I still responsible to pay back a charged-off debt?”, what is it that swerves past your mind? The answer is very likely to be a big NO. Right? You have all the reasons like millions others to draw such a conclusion since if the debt has been charged-off, then it is no longer there and as a matter of fact, it did just go away from you.
However, to understand your liability in case of a charged-off debt, you’ve got to understand what it actually means.
What do mean by a charged-off debt?
Any debt or asset that been charged off is struck off or removed from the balance sheet. Generally, debts that are more than 180 days past due get charged-off. In case, the borrower hasn’t made any payments during that time frame, then as per the accounting norms, it is very likely to remain like that in the days to come.
As a result, it loses the eligibility to continue as an asset on the books of the creditors. Hence, that debt would eventually be charged-off. However, the accounting norm practiced by the creditors to have your outstanding loan balance chargedoff does not imply in any way that you’ll no longer be held liable to pay back that borrowed sum to them.
Charged off debts and the concept of SOL
First of all, a SOL stands for statute of limitations. This is mainly followed by the respective states that provide a limit upto which debt collectors can approach the courts in order to get back the outstanding loan amount from their borrowers. Therefore, as you can see from this fact that a loan continues to be a financial liability of the borrowers until they pay that back.
Yes, the laws pertaining to SOL usually varies from one state to another and a lot of states don’t even allow the creditors to bring in any sort of lawsuits against their customers in relation to an open-ended account like credit card. The time limit that these creditors will have to honor ranges from three to six years. However, if you are are a resident of Rhode Island, then your debt collectors will be able to live their dreams because the SOL in this part of the country is 10 years.
Now, you must be on your toes since there are some debt collectors who’ll try their best to recover the loan money from you, even though the SOL has expired and that they have lost the ground to sue you in court for alleged payment default. They may try to do so by phone or mail.
Charged off credit accounts and your credit score
Unpaid charged-off accounts can be a real dampener as far as your credit score is concerned. This will actually cause trouble when you’ll want to buy some sort of big ticket item like a car or a house, take an apartment on rent or send in your job applications. Moreover, a lot of business houses get wary of loan applicants whose credit report shows a long history of unpaid credit accounts.
However, many of them would ignore those negative items, provided you’ve paid them off in due course of time, but then if you haven’t, then they might not approve you for any fresh lines of credit. Speaking about your charged-off accounts, then they’ll continue to show on your credit report for a period of seven years, as mentioned in the Fair Credit Reporting Act (FCRA).
The Act also mandates that all sorts of negative credit items be removed from a person’s credit report once they’ve survived their stipulated time-periods. Therefore, if you expect that the charged off accounts don’t have any adverse effect on you, then you’ll have to wait for this long in order to achieve so. However, if you can payoff your dues through a well-planned debt repayment plan, then you can hope to improve your credit score gradually over time.
What if you are asked to pay-up for a charged off debt?
If your debt collectors harass you for the repayment of a charged off account, then there are ways to deal with them with a heavy hand:
Today's post is by Michelle.
"...be ye thankful" - Colossians 3:15
Let's face it...with the overwhelming debt and people we owe, it's sometime difficult to be thankful for all that we have. We oftentimes get upset at our creditor or annoyed that we have outstanding loans, a vehicle to pay for, a house to maintain, etc., etc., etc. In all the complaining, we oftentimes forget that although we have debt and it's annoying and painful to manage, we have been blessed to have what we have due to the loans, use of vehicle, roof over our heads, etc., etc., etc.
Is it difficult to pay off debt? Of course. Do we get frustrated that we don't have any debt solutions or not sure how to eliminate credit card debt? Do we give up sometimes because we are horrible at financial management and no matter how many personal financial tips we get, we still feel like there is no end to the frustration of debt?
It helps to take a step back and just be thankful. I mean, were we not able to go to school because a bank was willing to lend us money? Are we not able to drive our kids around, get to work, and take trips with the family with the vehicle that we have that huge loan on? Do we not have a place to live that has a roof, protects us from the storms and natural elements, and keeps our children warm? Take a step back and just be thankful. Be grateful for what you have, even if there may be a debt tied to it.
Remember that just because you have debt and feel like there is no way out of it, rest assured there are many resources available to help you get out of debt. You don't have to remain hopeless and you can use those resources to help you with personal financial management and the ability to pay off debt. Remember that you will then become happier and more thankful when you finally find a solution to help you pay down your debt so the sooner you are thankful, the sooner you'll be happy, and the sooner you'll find a solution to become debt free!
Shane D. Sorensen, MBA
Hi. Thanks for checking out my blog! I decided to blog my experience with the Money Max Account while offering other helpful, financial advice. I hope what I share proves useful.