February 3rd, 2010 
admin 
Being in debt stinks, I know, but what happens if you get a phone call, and the debt collection agency is telling you that you’re debt is going to be “charged-off.” What the heck does this mean? What can I do about it? You don’t have to worry right now, because I’m going to give you some tips, and pointers on what you can do about it right now.
What is a Charge-Off?
When you don’t pay your bills for more than 6 months, the banks will typically “charge-off” your account. It doesn’t necessarily mean that you’re off the hook. It’s going to mean that they are going to send your payments off to a third party. Banks do this all the time, and sell your debt off to other companies for pennies on the dollar.
For example, let’s say that you owe Bank X $25,000. They will go to the open market, and tell the debt collectors to bid on it. Most likely, Debt collection company A will purchase your loan for $2,500. They are going to turn around, harass you, and try to get that $25,000 in full. Do you see how they can profit on this?
Now, you obviously owe this money, so you should still pay it off, but there are some more things that you should know about a charge-off.
A charge-off is a very serious thing when it comes to your credit report. It’s showing other creditors that you’re not going to pay your bills. This, in turn is going to effect your credit score greatly. This is why it’s always essential to pay off your bills on a timely basis, even if you can’t afford it. There are always chances to work out something, even if you have to pay the minimum payments.
Here’s what you can do, when it comes to your charge-off…
Work something out - Call up the creditor, and ask what you can do. Since they want your money, they will try, and work something out. Ask them what you can pay each month, such as a minimum payment, etc.
Pay in cash – If you have some cash laying around, a lot of creditors will accept payments of 50-60% of the bill, and call it even. So, for example, let’s take that $25,000 bill above. Most companies would take $15,000, and call it even. It’s up to you if you want to do something like this. If it were me, I would bite on that in a heartbeat.
Don’t give out information - Never ever give the creditors a direct deposit line. You will find that they will attempt to dip into your account, and take as they please. Instead, only send them a check, when you can afford to.
Always get in writing – When you pay off things in full, make sure that you get things in writing. What you’re going to find out is that you can agree to things, but is it writing? If it isn’t, you may not have a case.
A charge-off is a serious thing, and as long as you can pay your bills, and do it in a timely matter, you shouldn’t have a problem working something out.
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