How to Collect on a Debt That Was Charged Off
A charged off debt occurs when a creditor ceases collection efforts on a past due debt and instead, charges it off as noncollectable. The creditor then uses the charged off amount as a write-off on his taxes. If your company owns charged off debt, you can still attempt to collect at a later time, either through your own collections department or a third-party collection agency. The Fair Debt Collections Practices Act (FDCPA) protects the rights of consumers in the area of debt collection, and any collection efforts must abide by these federal rules. Failure to do so could result in civil penalties.
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Things You'll Need
- Telephone
- Written correspondence
- Copy of original debt contract
- Copy of Fair Debt Collections Practices Act (FDCPA)
- Copy of mail receipts
- Attorney
Instructions
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Call the consumer between the hours of 8 a.m. and 9 p.m. to request payment. Once a consumer informs you or your representative, in writing, that they no longer wish to receive such calls, you are prohibited from doing so.
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Send the consumer written notification of the debt. The letter must include the amount the consumer owes and the contact information of the collector. You must send this notice within five days of making telephone contact with the debtor.
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Inform the consumer, in writing, that she has 30 days from the date of the letter to request validation of the debt. You must also tell the consumer in plain English that the correspondence is an attempt to collect a debt, and any information received from the consumer will be used for that purpose.
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Provide the consumer validation of the debt if he requests it, which includes copies of signed credit card statements, the original contract, and the name and address of the original creditor. Maintain a copy of all postal receipts that prove that you followed this step.
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Abide by all cease and desist requests sent to you by the consumer. A C&D letter prohibits you from contacting the debtor again in any manner except to inform the debtor of legal action against him.
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File a civil suit against the debtor if the debt still falls within the statute of limitations for her state. Once a C&D letter is sent, this is the only option left that will allow you to collect on the debt. You may need an attorney for this step.
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Settle the debt with the consumer if he is willing or if not, obtain a judgment against the debtor that will allow you to seek wage garnishment and other asset claims against her, depending on the laws of the governing state.
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Tips & Warnings
Although you or your company can collect a debt yourself, it may be more cost efficient in terms of time and money to hire an agency to do it for you. If you accidentally violate the rights of the consumer, you could open yourself up to civil penalties that far exceed the amount of the debt you were trying to collect.
Never harass or threaten a debtor. The FDCPA forbids it and you could face a stiff penalty for each occurrence.
References
Resources
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