Charged Off Debt and Credit Rating Advice

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READER QUESTION

What Can I Do About a Charged Off Debt?

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Bills.com Resident Expert
Dec 12, 2011
BILL'S ANSWER

Federal law (US Code Title 15, §1681c) controls the behavior of credit reporting agencies. This law is known as the Fair Credit Reporting Act (FCRA). Under FCRA §605 (a) and (b), an account in collection will appear on a consumer's credit report for 7½ years. The clock starts approximately 180 days after the date of first delinquency on the account. To learn when an account will be removed by the credit reporting agencies (TransUnion, Equifax, and Experian and others), add 7½ years to the date of first delinquency. Subsequent activity, such as resolving the debt, is irrelevant to the seven-year rule. However, if the debt is a tax lien, that can appear for seven years from the date of payment. A bankruptcy will appear for ten years from the date of the final order. Delinquent federal student loans can be reported indefinitely, i.e., for as long as they are delinquent.

Just because a debt is removed from a credit report does not mean the statute of limitations for receiving a judgment to collect the debt has passed. Federal credit report laws and a state statute of limitations laws are separate and independent from each other. The seven years starts running from the date of first delinquency, which generally means seven and a half years from the date of last payment. Review your credit report carefully to make sure the date of first delinquency on these accounts are correct.

Even if the debt has been purchased by a third-party debt collector, it cannot legally change the date of charge-off. Unfortunately, collectors have been know to change dates in an effort to keep accounts on credit reports longer to coerce consumers to pay an old debts that would have otherwise fallen off their reports.

If you believe this creditor is improperly changing the charge-off date reported to the credit bureaus, your first action should be to round up any documentation showing the actual date of charge-off, such as a collection letter from the current creditor or the previous creditor, or an older copy of your credit report reflecting the accurate charge-off date (you could also find the last date of payment, which would be valuable supporting data).

You can then file disputes with the three credit bureaus demanding that the inaccurate data be corrected — keep in mind that this process will take some time, usually several months, so be patient. You can also file a complaint against the creditor or collector with the Federal Trade Commission.

If the creditor is a national bank, you could also file a complaint with the Office of the Comptroller of Currency.

Hopefully, a combination of disputes and complaints to the proper consumer protection agencies will stop this creditor from causing you problems going forward. Keep in mind that accounts that are reported accurately can stay on your credit report for 7½ years after the date of first delinquency, so even if the charge off date is corrected, this account may ding your credit for a few more years to come.

Visit Bills.com for more information on credit help.

There you can find more information about credit reporting and ways to improve your credit score. Best of luck!

Best,

Bill

Bills.com

Comments (37)


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Lisa B.
Marietta, OH  |  June 09, 2011
My husband and I both had accounts with Capital One and both went into delinquency then charge off. His account is listed with an outside collection co. Mine however is still showing on my bureau as being with capital one. We have been paying an agreed upon amount each and every month without fail. I was wondering if my account can be pulled back from charge off to show I have held up my end of the deal. I spoke with Capital one and they claim they cant help even though I have received statements from them? I know they cant help with my husbands account. I am also wondering why they cant report your payments to the credit bureaus as this does show some reliability?
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Bills.com
June 09, 2011
Under federal law, a creditor must report accurate information to the consumer credit reporting agencies. The key issue for you is, whether the information Capital One reports to the credit bureaus is accurate. If it is, then you have no recourse. If it is inaccurate, then you should dispute the derogatory account.
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Stephon D.
Oxon Hill, MD  |  May 15, 2011
Verizon is one of my two Charge offs, but I had their service for 5 mo at $30 a month but they have me owing $365 but cannot give me a brake down of why I owe them, but because it was so long ago I dont remenber my form of payment, I know I payed them over $100 but they turned me off when they first made the mistake. I've put in a dispute is there anything else I can do?
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Bills.com
May 15, 2011
Because you don't have any records to back up your recollection of what you paid so far, and given the size of the debt, I think the best thing to do is to pay the debt in full, unless the dispute you filed bears fruit. Did you file the dispute directly with Verizon? Another possible route would be to contact the agency in your state that regulates cellular phone service and file a complaint with them.
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Bill
December 10, 2010
A charge off does not mean the debt is forgiven or change a debt's legal status. When a debtor stops paying on a debt, a creditor will attempt to contact the debtor on the telephone and via the mail. When the number of days since the most recent payment reaches 120-180 days, the account is no longer considered current and the creditor is required by generally accepted accounting principles to charge-off (also known as write off) the debt. Writing-off a debt does not mean the debtor is no longer responsible for the debt, or collection efforts cease. For the consumer, the only real consequence of an account charge off/write off is the account will report as a negative item on the consumers' credit reports.
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Bills.com
March 03, 2010
You are frustrated about your situation, which is understandable. You are not alone in your predicament as I receive messages daily from people facing foreclosure. However, there is no evidence to suggest that your tactic will have any positive legal outcome. Going to jail is unnecessary in this situation and is not an outcome that will assist your family. Instead, I suggest you consult with an attorney in your state regarding your financial situation to plan a strategy that will resolve the debt before a deficiency judgment is decided against you. Find new housing, move forward with your life, and leave this chapter behind.
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Givengoodadvice .
March 03, 2010
we're about to lose our home to foreclosure. Husband lost $85K in income in a two-year period due to the greed of a hostile takeover. We have two young children and behind on everything, no health insurance, no life insurance and well, upon repeated attempts to get a modification with 2 different companies, visiting the congressman as well as writing the White House, we cant get any help.. so, a friend told me about Accepted for Value. I have ordered a stamp and I am going to use this as my last resort. I plan on sending my mortgage bill stamped with A4V, I plan on sending the capitol one people the A4V and anybody else that has thrown us into collections. I am at my last resort and I do not fancy packing a suitcase and sleeping out on the curb with my 4 and 6 year old. so, if this works, then great.. if it doesnt, we're losing our home anyway, and if I get tossed into jail at least they will feed me. I am struggling, and I've had it. It's either attempt to implement A4V or choose to die. Guess what I'm choosing? I dont care anymore because nobody else does.. nobody has been able to help this family. So I am going to do all that I can and this includes sending the IRS an A4V stamp. We have been served a notice to respond within 10 days and to pay back $26K on the mortgage within 45 days or a foreclosure judgment will be issued. Since I obviously do not have this, cant get any help, I am going to do this Accepted For Value and see where it takes us.. it's my last shot at some type of relief.
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Bills.com
January 08, 2010
I cannot think of a reason you should not report the accident to your insurance companies. The fact that you (apparently) defaulted on your vehicle loan is irrelevant to the fact that the vehicle was damaged in an accident.
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Melissa .
January 07, 2010
I have a car that has ben charged off but has been totaled also. I was not aware that it was charged off. Can I still file against my gap insurance and insurance company?
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Bills.com
July 17, 2009
You have a daunting credit card balance, but if you develop a plan and stick with it, you can handle it. You have four options: credit counseling, which may be able to negotiate interest rate concessions, or debt settlement, which cuts the actual debt by negotiating a smaller balance, or a debt consolidation loan which is probably not what you need, or bankruptcy. You can find the answers to most of your specific questions in Collections Agencies, Collections Laws and Your State's Statute of Limitations.
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