If you have a debt that has been charged off, there is a good chance that your finances have been in turmoil for a while. Once you have gotten your financial house back in order, you may think that you no longer have to pay the charged off debt because it has been removed from the balance sheet of the creditor you owe. You may not even be receiving statements on the account from that particular creditor anymore. Unfortunately, putting that charged off debt in the back of your mind is a big mistake because technically, you are still responsible for paying off the amount owed.
What Happens When A Debt Is Charged Off?
When a debt is charged off, it is removed from the balance sheet of the company that is owed because it is typically more than 180 days past due and it is unlikely that it will be paid anytime in the near future. This allows the company to take the amount off of its books as a current asset for accounting purposes. This has nothing to do with you repaying the debt according to the agreement you signed for the account. In order to limit the amount of damage to your credit score and credit history, you should try to make an agreement with the creditor that allows you to repay the debt as quickly as possible at a payment that you can afford.
Is There A Statute Of Limitations On Legal Actions Against Me?
You are responsible for repaying the debt that you owe for as long as the amount is owed. However, there is a statute of limitations for forcibly collecting on the debt through legal action. If the account is an open-ended account like a credit card account, state law generally dictates that the creditor cannot sue the account holder for the debt after six years have passed. A few states cap the length of time at three years, while Rhode Island allows for legal action ten years after the account has become delinquent.
Will Debt Collection Companies Still Try To Collect?
Even if enough time has passed that the legal action is no longer on the table, debt collectors can still try to contact you and get you to pay off the debt that you owe. These debt collection companies buy delinquent debts from companies for pennies on the dollar and they get to keep whatever they can get you to pay, so they can be quite aggressive in their attempts. Any charged off accounts are removed from your credit history after seven years, so it may take that long for you to stop feeling the negative credit effects of having an account that was charged off.