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Charge Off, Credit Report, Statute of Limitations & Banks

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Mark Cappel
UpdatedJul 15, 2024
Key Takeaways:
  • Learn when an account moves into 'charge-off' status.
  • Examine when the statute of limitations can make a debt expire.
  • Dispute any inaccurate information on your credit report.

I stopped paying a creditor 9 years ago. My bank just merged with them and collected the amount due. Is that legal?

Can a financial institution collect on a charge-off account from nine years ago because they have merged with your present financial institution without giving you notification they will take your money?

Before I explore the issues raised in your question, we need to establish a few definitions and concepts.

Charge Off - what is a charge-off?

"Charge off" is an accounting term used by creditors when they move a delinquent account from its accounts receivable books to its bad debt ledger. This usually occurs between 180 and 240 days from the date of your last payment. The fact that an account is charged off does not mean the debt may not be collected later. The charge-off date also does not correspond to the statute of limitations on collecting a debt or the date that an entry on a credit record must be removed. All three dates or deadlines are independent of each other and have different meanings.

Because an account is charged off does not mean the creditor lacks a legal right to collect the debt. To the contrary, the creditor may move the account to its own internal collections department, or sell the debt to a third-party collection agency. At some point, and it varies by your state of residence, a debt becomes so old that it cannot be collected. This is where your state’s statute of limitations comes in.

Statute of Limitations - what is a SOL?

All states have a body of statutes in their codes of law called, "Limitations of Actions," commonly referred to as the statutes of limitations. The idea behind these laws is that we as a society have decided that we do not want old debts hanging around forever — we want people and businesses to be able to move on with their lives without worrying about being sued.

The length of time a creditor has to sue you depends on your state of residence and the type of debt. For example, many states allow longer for creditors to file suit to collect on closed-ended consumer loans than on credit card debts. Most states give credit card issuers three to four years to file suit after default, but some states allow as many as 10 years. Check out the Collection Laws and Statute of Limitations and How to Tell Which Statute of Limitations Applies to Your Situation pages. Those pages have more information about statutes of limitations and a list of limitations by state.

If a creditor files a lawsuit after the allowed time, the court will usually throw the case out and not allow the creditor to file suit again (called dismissed with prejudice).

However, you must raise the issue of expired statute of limitations in a written response to the lawsuit, or else the court will not know that the statute of limitations has expired. Although the periods vary from state to state, I believe that there is only one (Ohio) that is longer than 10 years.

Remember: The passing of the SOL does not mean that a creditor cannot sue you. It means if a lawsuit is filed, you should have an absolute defense against the lawsuit if you raise the defense. Also, keep in mind that the passage of the SOL does not prevent a creditor from calling you to collect on the debt; it simply provides you an absolute defense in court if the creditor files suit.

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Fair Credit Reporting Act - What is the FCRA?

Federal law (US Code Title 15, §1681c) controls the behavior of credit reporting agencies (CRAs). The specific law is called 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 up to 7½ years. To determine when an account will be removed by the CRAs (TransUnion, Equifax, and Experian and others), add 7 years to the date of first delinquency. The date of first delinquency is shown in credit reports. Subsequent activity, such as resolving the debt or one debt collector selling the debt to another collector, is irrelevant to the 7-year rule.

Some debts have a reporting period longer than 7 years, including:

  • Tax liens: 10 years if unpaid or 7 years from the payment date
  • Bankruptcy: 10 years from the date of filing (15 U.S.C. §1681c)
  • Perkins student loans: Until paid in full (20 U.S.C. §1087cc(c)(3))
  • Direct and FFEL loans: 7 years from default or rehabilitation date (20 U.S.C. §1080a(f)(1) and 20 U.S.C. §1087e(a)(1))
  • Judgments: 7 years or the debtor’s state statute of limitations on judgments, whichever is longer

The FCRA 7-year rule is separate from state statutes of limitations for debt issues. Learn the lifespan of a judgment in your state at the Statute of Limitations Laws by State page.

The start of the 7-year period begins at the date of first delinquency, or if no payments are made when the first payment was due. Review your credit report carefully to make certain the dates of your first delinquency are reported correctly. Unscrupulous collection agents reset the date of the first delinquency to stretch out how long a derogatory account appears on a consumer’s credit report. This is illegal under the FCRA.

Just because a debt does not appear on a credit report does not mean the statute of limitations for the debt has passed. The opposite is also true: The passing of a state statute of limitations on a debt does not mean the debt may not appear on a credit report. The federal FCRA and state statutes of limitations are separate and independent of each other.

Whether a debt appears on a credit report does not establish legal liability for the debt. The opposite is also true: You may have legal liability for a debt not reported to the credit reporting agencies. Credit reports are not legal records of every debt a person owes.

If you find any inaccurate information on your credit report, you should dispute the credit report listing with the bureau in question. See the Federal Trade Commission document FTC Facts for Consumers: How to Dispute Credit Report Errors for more information.

What happens to your debt when financial institutions merge?

I do not know your state of residence, so with a nine-year-old debt it is impossible for me to say with certainty that your debt is older than your state’s statute of limitations. Let us create a hypothetical situation here loosely based on your facts. Let us say that you have a debt with a financial institution, you reside in a state where the SOL has expired, and the two financial institutions have not merged. If the creditor sues you, and you raise a statute of limitations defense, the court will dismiss the case with prejudice, meaning they cannot return to court to sue you again for that debt. The debt is not erased. They can continue to pester you about the debt, but they cannot sue you or threaten to sue you.

Your facts matter when looking at SOL and charge-offs

Now let us look at your facts. If I understand your question correctly, your bank merged with your old creditor, your bank discovered an outstanding debt, and plundered your account without notice. As I understand the law of remedies, what your bank did was reprehensible but not illegal because the debt was never forgiven -- the creditor never released you from your obligation.

However, I hasten to say that I do not know what state you are in, and as a consequence have no way of knowing if you are shielded by state laws that protect consumers in this situation. For that reason, I urge you to consult with an attorney in your state who has experience in consumer law to review your facts.

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



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Debt statistics

Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q1 2024 was $17.69 trillion. Housing debt totaled $12.82 trillion and non-housing debt was $4.88 trillion.

According to data gathered by from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

The amount of debt and debt in collections vary by state. For example, in Texas, 37% have any kind of debt in collections and the median debt in collections is $1997. Medical debt is common and 19% have that in collections. The median medical debt in collections is $835.

Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.



BBenet, Jul, 2023
Ive been delinquent on my BOA cc. by months. I make the minimum monthly payment to prevent charge off while I try save enough to pay a settlement with them. I paid online with them and was told the minimum amount to prevent charge was $655, well the rep told me the wrong amount to pay and they ended up charging off the account because it wasn't the correct amount. I thought the amount was off so I contacted them again the same day and again was told I paid the correct amount. Well it was wrong and they charged off the account. Do I have any recourse since I was told twice the amount I paid was correct when in fact it was wrong. I saved both chat sessions transcripts from each representation.
RRenee, May, 2021

I had an investment property when the 2008 bust happen. I tried to work with bank, but they would not work with me. I did not do bankruptcy they put it on my credit report on may be 2010. This year 2021 I get a 1099 what are my option if any? I appreciate any help.

JJosh, Aug, 2021

Hello Renee,
Thank you for reaching out. We are sorry you are dealing with this financial situation. You may want to review this article, In addition, we would encourage you to speak with a local tax advisor to provide you with a more authoritative measure of your local state codes.

Regards, Josh

KKay, Jun, 2020

I have found only one reference so far to when, or even if a charge off is required after a specific amount of time. I just recently figured out that a four year old payday loan being reported, of course on the one credit report that does not display on credit karma, is still showing an installment loan as paid late for the same due date every month. I am currently showing the same “12/05/2015” unpaid late payment monthly equaling 48 late payments for the same final installment payment! Is it true that a lender must charge off after X amount of days? They were the last of all of my credit crud to clean up, feeling defeated. As paying them won’t erase 48 late payments, for one (and the final) missed installment.

DDaniel Cohen, Jul, 2020

Kay, here are a couple of resources for you. The first is a page at the FDIC website that has the requirements institutions face for charging off debt. 

Here is one of our articles about charge-offs that has good info for you.

I understand that it has been 48 months as you described it since the account went delinquent, but I believe the report is not showing 48 months of late payments. I am happy to speak with you about this and figure out if an error exists and if disputing the info on the report is a good step. You may email me at



AAnonymous, Aug, 2019

I had an account in Illinois and a loan with the same credit union. I had someone write me a bad check and I was unable to collect on it. It caused my account to go negative and the bank charged off the checking account. I have paid the loan off in full and did so based off the official pay off letter they sent me. They are now stating via bank messenger the pay off is a different amount then the one originally sent to me and that it includes the amount for the charged off checking account. They are refusing to release the title until the checking account fees are paid. Do you know if it is legal for a bank to charge a different amount than what the official pay off letter states and if they are allowed to hold the title from the loan until the fees are paid on the checking account? (account was charged off in April and I paid the loan off in full 1 week ago).

DDaniel Cohen, Aug, 2019

I will comment on your very reasonable question, but only with the preface that I don't give legal advice and nothing I say is to be considered such.

I think the language of the demand letter is crucial. If you are told in writing that you need to pay $X by a certain date and that will close the matter, then asking for more money seems improper, as does the act of not relasing title. 

However, it could be the case that there is language in the loan agreement that ties any accounts you hold with them together. It could be a right of offset issue. See and look for any language in the loan agreement about this.

Another suggestion is to speak with an attorney that handles violations of the FDCPA (Fair Debt Collection Practices Act). This kind of lawyer doesn't charge you a fee but will take the case if he or she is confident of winning the case, which will result in getting money from the creditor that is acting improperly. Do a search online for FDCPA attorney and the name of the city in which you live. Please report back on how things go for you!

TTewanda Palmer, Oct, 2016
In 2009 I financed a medical procedure and after the 1st treatment they stopped because I had MS, locking me into a contract because I had the 1st treatment. Because they would not continue treatment because of my medical condition, I stopped paying in 2011. The bank then charge off the debt and sent it to collections in 2011. After going back and forth between the bank, collections, and American laser, I finally received a refund. American laser refunded the money back to the bank. The bank then pulled the account from collections. I was told from the bank customer service that I was owed money since the money was refunded was more than what owe. I never received any money so I guess that was incorrect. A a year later I noticed that the bank left the charge off on my credit. 2 still has a balance and 1 says I legally settled for less than what was owed, but has a balance of 0. The bank keeps updating the charge off monthly. They refuse to delete it and keep telling me that only the credit Bureau can remove it. I also noticed that they put that I made my last payment on the day that amer. Laser refunded the money in 2012. They then later wrote it off again as a charge off in 2012. I asked the bank about it and they told me when the money was refunded it was toward the balance of the debt and it settled the account. Now this seems like complete by to me and I need help.
BBetsalel Cohen, Apr, 2017

If you want to delete an inaccurate item on your credit report, then check out article about credit repair and disputing a credit item. It sounds like you owed the bank money, which was at some time delinquent. However, it isn't clear if you paid off the account in full, or if the account was settled for less than you owed. I suggest that you speak to the bank and get all of the relevant records regarding the loan and the amount of money that was taken to pay off the loan.