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 noncollectable 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.
Quite often, creditors sell accounts they deem worthless (or not worth their time and expense) to third party debt collection agencies called Junk Debt Buyers.
When creditors sell an 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.
Finally, although debts expire, collectors still have the right to try and collect on old debts. (see statute of limitations for more info)There may be instances where discussing your situation over a public forum could potentially compromise your interests. On these occasions we will contact you directly via email in order to answer your inquiry in a confidential manner.