Should You Pay a Creditor After “Charge Off”?

[Evang. Felecia Spaulding]

REGINA LITTLES

What is a charge off? A charge off is when creditors usually charge off accounts after 180 days of nonpayment to get a tax credit for income tax purposes. By definition a charge off is the same as a write off and the bill is no longer owed to the original creditor. The original creditor has deemed the bill no longer collectable. Let me clarify that you may still owe the bill, however it may be to a new owner “collection agency”. Here’s where it’s gets very tricky because, debt collectors have purchased a new account and they have given you a new account number. In most cases, they report the new account to your credit report as if you just opened a “new trade line”. Apparently, the creditor has removed the account from its records and your account is no longer active. Creditors can no longer count your “debt” as an asset. Your debt is considered a loss to the lender or creditor. Let’s go back to why and how you may be deceived into believing that you owe a new company. Well, in your mind you may have owed someone at one point, but you did NOT, sign a new contract with the debt collector. Many consumers get into new contracts and make payment arrangements on debt that the original creditor has sold. Additionally, they make arrangements on old debt that has fees and outstanding balances that may not be accurate. Ethically, you do have a responsibility to pay your obligations, but you do not have to agree to pay a bill that is inaccurate. Consumers should keep in mind that the debt collector may take them to court and “attempt” to get a judgment for the debt. So, what happens next? Often times the lender will sell your debt to a collection agency, which means they get to make a small profit from your debt. The question is “should you pay the new debt collection company”? Well, would you pay a company that may be attempting to extort money from you? In this situation, the consumer should request a complete accounting of the bill to determine if the bill is correct. The consumer should also request to see the new terms of a contract or agreement by the third party debt collector and the original creditor. It would be very wise to request this information from the time that you receive a letter from the debt collection agency or if the company calls you regarding the bill. Charge offs can seriously harm your credit report. According to the Fair Debt Collection Practices Act, a consumer has the right to request a debt validation. If the new company “debt collection agency” cannot prove that the consumer owes the debt to the new company, the collection agency must cease collection activity. This means that the debt collector must cease all efforts including any reporting to a Credit Bureau. Now let’s look at what the Fair Credit Reporting Act says will happen if a debt collector continues to collect the debt. According to 15 USC 1692g (b), this would be a violation, one you dispute the claim. Another violation is 15 USC 1681, if they do not remove the trade line from your credit report. Additional information about the author and how to avoid debt traps can be found in the Trinity Collection atwww.reginalittles.com . If you have any questions about this article, email your questions to [e-mail] or call 321-287-0986. You can also join the fan club at www.creditadviseforyou.ning.com. Join the movement to help protect and educate consumers about the dangers of credit and debt traps. If you should need further assistance contact the state Attorney General www.naag.org. More information can be found at ftc.gov or call 1-877-382-4357.