What Are Charge Offs?
In horror movies, sometimes the scariest sound is silence and the scariest sight is nothing at all. The same thing can be true with debt-related communications. As nerve-wracking as it is to receive constant reminders about debts you can’t pay, whether these reminders arrive by postal mail, email, or phone, it is even scarier when a month or more goes by without you hearing anything from creditors who used to pursue you relentlessly in an attempt to collect payment. Debts do not just disappear into thin air without you taking action; if anything, they only lurk in the distance and then morph into something even scarier for the sequel. The only way to get rid of a debt once and for all is to repay it, settle it, or get it discharged. A charge off is not the same as discharging or forgiving a debt. It doesn’t mean that you no longer owe the money, only that the creditor has given up on collecting it from you. If charge offs are messing with your credit score, contact a Boca Raton debt lawyer.
Are Charge Offs Good or Bad?
When you fail to make minimum payments on a credit card for several months, the credit card company will charge off your account. This means that it will close your account and not allow you to make any further purchases. It also means that it will report the account to credit reporting bureaus as charged off. Most credit card companies charge off unpaid accounts 120 days or 180 days after the first due date that passes without receiving the monthly minimum payment amount.
The charge off will remain on your credit report for seven years, but that is not the worst news. When the credit card company charges off your debt, they can sell the debt to a third-party collection agency. Then the collection agency has the right to seek payment from you. Collection agencies are usually willing to settle for less than the face value of the debt, so if you settle the debt with the collection agency, it will appear on your credit report as repaid; the credit score penalty from the original charge off and the boost from settling the debt may cancel each other out.
How to Avoid Charge Offs
The best way to prevent charge offs from harming your credit score is to avoid getting your accounts charged off in the first place. If you are unable to keep up with minimum payments, contact the credit card company to negotiate a lower monthly payment amount; if you are sure that your financial hardship is temporary, at least ask the credit card company for an extension on payment due dates before they charge off your account. You might also be able to avoid charge offs by taking out a debt consolidation loan.
Contact a South Florida Debt Lawyer About Credit Card Charge Offs
A South Florida debt lawyer can help you if you are in danger of a credit card company charging off your account. Contact Nowack & Olson, PLLC in Boca Raton, Florida to discuss your case.