What Happens When Credit Card Debt Is Written Off?
If you stop making payments on your credit card debt, the credit card company will eventually give up hope of you paying your debt and will write off the remaining balance that you owe. You are still responsible for a debt, even after it is written off, and not paying the debt can eventually result in legal consequences.
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The Facts
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When a credit card company writes off an unpaid balance, the process is referred to as a charge-off. Charging off old consumer accounts allows creditors to claim a tax loss on the unpaid debts.
Time Frame
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Most credit card companies will charge off your debt after you allow 180 days to pass without making a payment. A creditor, however, is not legally required to charge off an old debt and thus may opt to hold on to the account for as long as it pleases. A charge-off will remain a part of your credit history for seven years.
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Significance
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A charge-off appears as a derogatory notation on your credit report. This lowers your credit score and will make it more difficult to qualify for loans and credit cards in the future.
Effects
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A credit card debt that is written off will often be sold to a debt collector. The debt collector will then employ various methods to procure a payment such as letters, telephone calls and possibly even a lawsuit.
Considerations
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A credit card debt that is written off cannot haunt you forever. A creditor or debt collector has a set time limit, known as a statute of limitations, to file a lawsuit against you to collect the debt. Every state has a different statute of limitations. Once this time period has expired, you no longer have a legal obligation to pay the credit card debt.
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- Photo Credit Image by Flickr.com, courtesy of Andres Rueda
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Comments
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Gary D Wallis
Jan 31, 2011
Once a company takes advantage of the charge off on their taxes, the debt is then discharged and extinguised. Because they decided to take the tax advantage. No more debt, I don't care who buys it.
