Are Charged Off Debts Still Collectible
There may be certain restrictions in the methods debt collectors use to collect charged off debts.
The IRS allows creditors to charge off debts that have become worthless. The rule is called the “Specific Charge-Off Method”. In a nutshell, this rule allows creditors to take a loss on their income taxes when a debt they are trying to collect becomes worthless. Companies do not actually have to go to court to prove the debt is uncollectible and they can still try to collect the debt at a later date. If they are successful in collecting the debt (or any part thereof) they must claim it on their tax return in the year collected.
Generally, creditors will try to collect the debt for a few months or, in some cases a few years. They either do this through an in-house collection department, or by hiring a third-party collection agency. When they hire debt collectors, the creditor retains legal rights to the account and the bill collector must act on behalf of the original creditor.
Quite often, creditors sell accounts they deem worthless (or not worth their time and expense) to third party debt collection agencies. When they sell the account, they sell all rights to the account as well so only the new legal owner of the account can collect the debt. Once a company decides to charge off a debt they are required to report that information to a credit bureau within 90 days of the debt’s charged off date.
Delinquent debts accounts are bought and sold daily so your old account might end up in the hands of a dozen different debt collectors over the course of several years. This explains why you receive out-of-the-blue calls from debt collectors demanding payment on an old forgotten debt.
If you receive collection calls or notices on charged off debts that you have already paid off (either before or after the charge-off) then immediately dispute the debt in writing using this free sample letter Previously Paid Debt Letter.
If you believe you are a victim of illegal or unfair debt collection practices, submit your information to a FREE* Fair Debt Lawyer by:
- Clicking here for a FREE* Fair Debt Case Review;
- Calling toll free 888-FDCPA-LAW (888-332-7252);
- Clicking here to locate a FREE* Fair Debt Lawyer.
The debt collector may just be liable to you for statutory damages of up to $1,000, plus any actual damages suffered, plus attorney fees!