How to Settle a Bank Overdraft Charge Off an Account

As long as your checking account is in good standing, you are an asset to a bank. When your account goes into the negative, you become a liability. Liabilities do not look good on the bank's books. For this reason, once the account remains in an overdraft status for a while (around six months), the bank charges off the account as bad debt. You can still settle the account, even if it's no longer on the books.

Instructions

1. Check your state's statute of limitations on debt. If you make a payment toward a charged-off account, you reset the clock for the debt. This makes the debt appear as if it just occurred, which may do more harm to your credit than good.

2. Contact the bank and ask if the account can be paid off. If so, settle the account directly through the bank. Depending upon how old the debt is, the bank may refuse partial payments.

3. Telephone a third-party collection agency if it has become responsible for the debt, and explain that you desire to settle the account. If the amount of your overdraft debt is significant ($1,000 or more), ask the agency for a written deletion agreement, under which the agency will delete the debt from your credit report.

4. Ask the agency if a payment plan is acceptable. Some agencies will settle for a relatively small amount to generate a lump-sum payment. Get all agreements in writing.

5. Pay the collection agency, according to the written agreement. Hold the agency accountable for reporting your payments to the credit and consumer reporting bureaus, ChexSystems, Experian, Equifax and TransUnion.

Tips & Warnings

• Failure to settle your charged-off account can prevent you from opening new bank accounts, since many banks base new account approvals on information provided by ChexSystems.

References

• Debt Prison; Should I Pay The Collection Agency Or Original Creditor?; Debt Prison; January 2009
• Credit Library: Deleting Negative Accounts
• Credit Magic: Pay For Delete Letter -- Negotiate To Remove Negative Listing
• Check Fraud: National Check Fraud Center -- ChexSystems Information and Guide
• NEDAP: Debt Collection Basics
• The Dollar Stretcher; How Charge Offs Affect You; Gary Foreman