If you have been drowning in debt you may have considered credit negotiations or debt settlement options. These are both options worth considering, but the details behind the debt resolution should be carefully considered. There are cases in which people agree to have their debts “charged off”, only to find out later that the debt is still legally collectable.
To Owe or Not To Owe
Anytime a creditor says they will “charge off” a debt that simply means that they consider the debt to be noncollectable. This generally happens when a creditor decides they cannot collect on the debt or that the debtor is financially insolvent. The problem is that many people confuse this action with a settlement or negotiation agreement, which requires some payment on behalf of the debtor and provides a letter of debt satisfaction once payments are made.
While having a debt written off by a creditor is not inherently damaging, it does leave the debtor subject to unknown consequences. The creditor will most likely report this information to the credit bureau and may even sell the debt to a collection agency. When this happens the debtor is still legally liable for the repayment of the debt and may be facing additional penalty fees. Debtors should avoid having the debt written off unless the creditor is willing to provide a letter of debt satisfaction releasing the debtor from payment liability.