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Do I still have to pay “Charged Off” Debt?

On Behalf of | Aug 14, 2015 | Bankruptcy Basics

If you are working to resolve your debt, it can be confusing to fully understand which debt relief option is best for you. When a creditor “charges off” your debt, many consumers incorrectly believe it means that they no longer owe the debt. Sadly, this is far from true and debt collectors will still seek to recover it from you.

By way of example, if you owe $5000 to your credit card company and stop paying the debt, the original creditor will attempt to collect from you for several months. This often includes harassing telephone calls, collection letters and other annoying tactics. If these efforts prove to be unsuccessful, the original creditor will determine that your account is no longer a performing asset. This means that they are not making any money off of you and your account is transferred from their asset list and given a value of zero. Your debt account is then sold for pennies on the dollar to a debt collector. Debt collection agents may buy delinquent accounts for as little as 20% of the amount owed.

Your original creditor must stop reporting the account on your credit report and note that the balance is “zero” since they are no longer the owner of your debt. The debt collector is now the owner and has the ability to report the debt to the credit reporting bureaus. It is important to understand, however, that in many cases BOTH the original creditor and the debt collector agency report the debt. As a result, you have two $5000 debts being shown instead of only one. At this point it is time to seek help and ensure that your credit report is corrected.

Additionally, you must understand that just because your original creditor has “charged-off” your debt, you still owe it to the debt collector that purchased it and now owns it. In fact, you owe the full balance, interest and penalties.

If you have debt collectors harassing you to pay your debt and you are interested in obtaining debt relief by filing a personal bankruptcy, let us help.

We are bankruptcy lawyers who know how to make a difference in your financial situation. We have experience you can rely on and we care about your results. Contact our New Jersey law firm online by filling out the form or by calling 973-323-2953 to schedule a free initial consultation with an attorney at Levitt & Slafkes, P.C..