Advice on dealing with old and charged off debt accounts

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READER QUESTION

I have a lot of old debt and charge offs, I want to know the best way to go about clearing these up?

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Bills.com Resident Expert
Feb 07, 2012
BILL'S ANSWER

You are correct in thinking that most debt will be removed from your credit report seven years after the date of charge-off.

The term "charge-off" is an accounting term used by creditors, meaning that a creditor has transferred an account from its "accounts receivable" books to its "bad debt" ledger. Credit card issuers are required to do this by the federal Office of the Comptroller of Currency, in an attempt to prevent banks from inflating future earnings statements with old and defaulted accounts. For the consumer, the only real consequence of an account charging off is the account will report as a negative item on the consumers' credit reports. The fact an account is charged-off does not mean the debt is forgiven, disappears, or is no longer collectable.

Charge-off accounts are required to be removed from your credit report seven years after the date of charge-off, so these old accounts will not damage your credit rating indefinitely.

The best way to determine the charge-off date of an old debt is to obtain a copy of your credit report from each of the three major credit reporting agencies — Equifax, Experian, and TransUnion. Your credit reports should list the date that each of the accounts in question were charged off by the original creditor. Even if the accounts have been sold to a third party since the date of charge-off, your credit reports should still reflect the original date of charge-off, as that is the date upon which the credit reporting time guidelines are based.

Third party debt collectors are not allowed to legally change the charge-off date for an account that they purchase, so the fact that your accounts have been purchased should make no difference in the length of time these accounts will appear on your credit reports. However, debt purchasers have been known to try to change dates of last payment and charge-off in an effort to keep old accounts on consumers' credit reports longer than legally allowed.

If you think that a debt purchaser is reporting an inaccurate charge-off date. You should first contact the original creditor to determine the date you last made a payment on the account. Since creditors charge-off accounts between 180 and 240 days from the date of last payment, you should be able to roughly determine the charge-off date if you know when you last made a payment on the account. If a debt purchaser is reporting a charge-off date that is different from that being reported by the original creditor, you may want to dispute the credit report listing with the consumer credit reporting bureaus. See the Federal Trade Commission document FTC Facts for Consumers: How to Dispute Credit Report Errors for more information.

Once you have determined the actual charge-off date, and confirmed that the account information is reporting correctly to each of the three credit bureaus, you should be able to determine when the accounts will fall of your report. The accounts should be removed automatically from your credit report seven years after the date of charge-off. As mentioned above, it is important that you verify that the information on your credit report is accurate to make sure that these negative accounts are removed from your credit reports in a timely manner.

To learn more about credit, credit reports, and credit scoring, I encourage you to visit the Bills.com credit help page.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

Comments (130)


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Andrea J.
Tumwater, WA  |  February 07, 2012
My family had gotten in a situation where we defaulted on our credit cards and have not made payments for about 3 years. Per my state the statue of limitations is 4 years. Now, my current concern is re-aging these debts. We are not in a position to pay them off, not unless we were given a really good settlement offer. One of our cc we did. The debt is now totaled to just over $3,700. I received a settlement offer in the mail that seems fishy and too good to be true, saying I have until the end of this month to accept it. It is through a collection agency, which I can only assume purchased this bad debt. They are saying they will settle with me for only $99. My other question is, we do have some other debt (medical,) and were considering bankruptcy. But, we have maybe 5 years left of negative reports on our credit reports from the cc debt (medical is older and not on it.) Would it make more sense to just not pay or file for bankruptcy (unless they tried to pursue us before the statue of limitation are up,) which would then have a negative effect on our report for 10 years, so an extra 5 years from what it currently would be.
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Bills.com
February 08, 2012
Regarding the offer from the collection agency, you can do a debt validation within the 30 day period of receiving the letter. This will not re-age the debt. If you do decide to repay the debt, then negotiate for a pay for delete.

As regards your overall debt situation, there are different debt relief solutions available, including bankruptcy and debt settlement. For more information read the Bills.com article about debt relief. Follow the links I mentioned to learn more.
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Julie F.
Miami Beach, FL  |  January 11, 2012
I lived in WA in 2008 and accumulated debt that was charged off. A job transfer took me to FL later that same year and is where I remain. No effort has gone into "hiding" from my creditors, but none have gone into contacting them either. I am finally in a financial situation to begin paying back debt. The statute of limitations in FL is 4 yrs. However, I am not sure if the statute tolled by my departure from WA. How can I find out if the statute of limitations has passed so that I do not end up paying down debt that is non-collectable.
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Bills.com
January 12, 2012
First, read the Bills.com resource statute of limitations for a brief overview of how to analyze statute of limitations questions. Second, consult with lawyer in your present state of residence (you mentioned Florida) who has civil litigation experience. He or she will analyze your contract(s) that gave rise to the Washington debts you mentioned, research Washington law, and advise you accordingly.
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Amanda G.
Tallassee, AL  |  January 11, 2012
I have a judgement against me for an upaid credit card through a credit union, the date filed was 10/12/2005. How long will this stay on my credit? Should I try to pay this judgement or let it fall off my credit report? Also, once something fall off your credit can a creditor put it back on or renew it? Thank you for your time.
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Bills.com
January 11, 2012
Under the FCRA, a civil judgment can appear on a credit report for seven years or the length of a judgment's statute of limitations in that consumer's state, whichever is longer. You indicated you reside in Alabama. The statute of limitations for judgments in Alabama is 20 years. Therefore, the judgment will appear on your credit profile for 20 years.
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Thorndale, PA  |  November 19, 2011
Hello and thanks for all of this information. My wife and I short sold our home a year ago. We also settled a few credit card accounts for less than full amount with the original creditors. We have one left that has been charged off but not sold to a collection agency. My questions is, does it make any sense to pay anyone for this debt? Are credit rating has taken a big hit with all of these changes. We are currently living with parents and do plan to move in a year or so into a rental. In the meantime do we save all the cash or throw some of it at this bad debt? What would be the reason to do so if it will fall off our report in 7 years?
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Bills.com
November 20, 2011
By not dealing with your unpaid credit card debt you will face two major consequences:

  • negative impact on your credit report
  • being sued by the creditor, which can lead to a court judgment and then to wage garnishments, bank levies, and liens on your personal property.

If a public judgment is obtained by the creditor, then this will not fall off your report after seven years.

You mentioned that you successfully negotiated credit card debts. The type of debt settlement tactic appropriate for the remaining debt would depend on your financial situation and the size of the debt. Use Bills.com's Debt Coach to find a solution appropriate to your situation.

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Queens, NY  |  November 18, 2011
Hi, I most recently viewed my credit report and noticed 2 active negative accounts. So I called to see what they where and was informed that they where cell phone bills from 2004. with the last payments being made in 2005. But there showing up on my credit report as being opened in 2010 and not being paid how is this possible?
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Bills.com
November 20, 2011
I assume that you still owe money for the cell phone bills, with the last payments you made in 2005. It is possible that the debt was sold to a collection agency, who has opened up the account and improperly re-aged the debt.

Do not contact the collector or pay any money until you determine if the Statute of Limitations has expired.
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Jenna R.
Cleveland, OH  |  November 12, 2011
I am 21 years old and unable to open credit because my score is so low. My debt only totals about 1,500. which i can easily pay off now. My question is, I have a charge off Macy's account for 335 dollars. Can I pay that off? Or once they are charged off you just have to suffer the consequences?
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Bills.com
November 14, 2011
You are still liable for the debt to Macy's. To improve your credit score contact the creditor and negotiate the settlement of the debt. Once you pay off the debt, it will appear as having been delinquent, but a zero balance. If you are having trouble obtaining a credit card, look into a secured credit card. Bills.com offers advice and tips about secured credit cards and credit score.
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Maureen R.
West Islip, NY  |  November 09, 2011
About 15 years ago, i damaged my credit. I had some charge offs. I have settled some. I just received a letter from a debt collector for a charge card i do not remember having. I got the 3 free credit reports and they are no longer showing any of my charge offs and I can't seem to find a way to see them. I do not want to call in fear of the never ending harassment that will follow. So my question is How do I check if this charge is mine? or Is it passed the time that they have to collect?
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Bills.com
November 09, 2011
Start by validating the debt. Check on the statute of limitations on debt in your state, to see if enough time has passed since your last payment on the account for the SOL to have expired. Do NOT pay a penny or have any communications with the collector, before you get proof that you still owe the debt and whether you can raise the SOL defense successfully if collection efforts proceed.
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David D.
Avon, NC  |  October 29, 2011
Actually-- to knowingly attempt to collect a debt past the statute of limitations is a violation of the NC Fair Debt Collection Act and the collector will be penalized $1,000 to be paid to the party to whom they are attempting to collect the debt. I think this is common throughout the country, but I'm only licensed to practice law in NC.
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