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Charge Off |
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A charge off is the term that creditors use when they determine that they are not able to collect a debt that is owed to them and they write that debt off as a loss against their income taxes.
The act of creating a charge off balances the creditor's books, but it does not let the debtor off the hook. A charged off debt is not a "forgiven" debt. The money is still owed and the creditor will usually turn that debt over to a collection agency or a lawyer to effect collection.
A charge off usually occurs when a debit has gone without payment for at least a period of six months and the debtor has made no attempt to work with the creditor to negotiate new payment terms. Once the charge off occurs, the debtor's credit bureau is notified and the charge off is recorded as a negative entry.
Having one or more unresolved charge offs usually results in the debtor being denied credit by other lenders. It can also affect the interest rate that other lenders charge on current debts even if those lenders were not impacted by the charge off themselves.
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Credit Card Definitions > A - E > Charge Off
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