“My Debt is a Charge-off. Do I Still Need to Pay It?”

In August 7, 2007
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It’s time for me to bust another common debt-related myth that I get asked about frequently. Basically, the myth is that once a creditor records a “charge-off” when your account is declared a bad debt and a loss is recorded by the creditor, then the creditor no longer has a right to attempt further collection on that written-off debt.

Here’s a quote from a bogus “debt elimination” website that pretends to be a valid source for consumer education in financial matters: “They cannot collect one penny,” the website says. “If you see charge-off on the account they are trying to collect on your credit report it is illegal for these debt collectors to collect one penny. The original creditor took the bad debt as a loss when they filed their income tax and got a credit benefit from the IRS.”

What a load of horse manure! Folks, this statement is Completely 100% FALSE. Aside from the fact there are millions of debt collection lawsuits/judgments that prove otherwise, this ridiculous pronouncement does not even make sense from an accounting perspective.

When a creditor records a charge-off, they are forced to “write off” the uncollected balance, usually after 180 days of delinquency. Naturally, this translates to less income, which lowers the corporate tax owed for that year. Even on this point, the website gets it wrong, because this is not a “credit benefit from the IRS,” but rather a lower tax bill because the company made less money to be taxed on.

OK, so far so good. But let’s say the creditor is successful through the collection process and recovers 50% of the balance that was written off. What happens next? Simple. The recovered amount is recorded as an ADJUSTMENT on a separate part of their bookkeeping ledger, usually in a section called “Allowance for Loan Losses.”

Here is a direct quote from the official corporate Form 10-K filed with the Securities and Exchange Commission by one of the world’s largest credit card banks:

“Allowance for loan losses represents management’s estimate of probable losses inherent in the portfolio. Attribution of the allowance is made for analytical purposes only, and the entire allowance is available to absorb probable credit losses inherent in the overall portfolio. Additions to the allowance are made through the provision for credit losses. Credit losses are deducted from the allowance, and subsequent recoveries are added.”

There you have it, straight from the horse’s mouth. The allowance account is the amount reserved for estimated losses against loans made. When the company record a charge-off loss, it must be deducted from that allowance account. The important bit is that “subsequent recoveries are added” to the allowance account. In other words, in plain English, “it all comes out in the wash.” The recovered funds are simply accounted for separately. And that *new* income is properly taken into account, offsetting a portion of the loss previously declared.

So what does all this mean to you if you have a charge-off account? It’s very important you understand that a charge-off does NOT relieve you of your legal obligation to repay the debt. You are still on the hook to pay that debt (or settle it). This fact is well-known to anyone who has spent more than a few days working in the debt/credit industry on EITHER side of the fence. Only an absolutely CLUELESS amateur – or a deceitful con-artist peddling a bogus “debt elimination” program – would claim otherwise. Yet if you go to your favorite search engine and type in “debt elimination,” you will quickly find dozens of websites that make this absurd claim.

Don’t buy into this nonsense and ignore charge-off accounts just because you read on some website that you’re no longer responsible. It’s vitally important that you (a) understand the status of your debt accounts, and (b) work toward achieving a resolution on those accounts. Otherwise, you might just face a lawsuit that turns into a judgment, which could lead to a wage garnishment or a lien on your property.



  1. Hello Charles,
    I just wanted to share with you that I came across your site in search of general information regarding information about credit and what-not just to stay updated with times. I’ve read many of your replies and just wanted to thank you for helping out so many people. Keep up the good work!

    • Dantheman, thank you for visiting the site and posting this comment, much appreciated.


    Please note that this thread is officially closed. Also, no further comments or questions will be accepted on the topic of auto repossessions, as there should be ample information contained in the above replies for readers to assess their situation.

  3. Kirby, the Statute of Limitations is 5 years in IL for credit card debt. It’s possible that you have “re-aged” the account by making payments, thus resetting the clock on the SOL period. Depending on what CA is involved, it probably does still make sense to settle the account. I would need to know a lot more about the situation to make a firm recommendation one way or the other. If you decide to proceed with settlement, feel free to purchase one of my program levels to get the training and support you need to avoid further beginner mistakes (like making payments on an account past the SOL).

  4. Hello, I really need help to clear this question. I had a credit card with Amex and everything was fine up till 2003 when I lost my job and all went wrong. I was out of country for about about 5 years, and now I live in IL, I opened the account when I was in WA. Here is what my credit report says
    Status as of Jun, 2010
    Date opened Sep, 1996
    Date of last activity Jul, 2005
    Date closed Not Reported
    Largest past balance $5,976
    Terms Not Reported
    One thing I like to mention is that it was sold to a CA and I made payments for about 8 months till 2008/9 and they stopped taking out from my account, now it is back with AMEX.( one of the three reporting agencies show last reported 2005 and other sometimes show 2009)
    My question is how long will it be reported on my credit reports and I should I settle this account as they have been sending my 60% off , offers?
    Thank you in advance for help

  5. Hello, I live in Texas I was reading over the blog to see if maybe you had already answered my question through someone else’s…. I seen a few silmiar posts but didn’t exactly understand. So my question is…. If I have an item from the orignal creditor that is about to fall off of my credit report in a couple of months will the collection agencies that they sold my account to fall off also if i haven’t made any payments on them? Oh …. and it is a credit card debt. And in a few months it will be past the 7 years. So really I’m just trying to see if the collection agency will be taken off also at the same time as the original debt falls off.

  6. Jay, this is a tricky situation that requires the help of a good consumer attorney. See if you can find someone from NACA to help (www.naca.net). But my take is that you first have to verify the current status of the title — it’s possible that Ford transfered title when they sold the account to a debt purchasing company, assuming that they did sell it rather than retain ownership. If this is the case, it may be why they were unwilling to consider an offer. But I really do think you need some legal help for this situation to get it resolved in your favor.

  7. My deceased wife’s car was never paid off. I tried to put the car in my name but Ford Finance would not do this for me. Therefore I was not able to license the car . I continued to make payments on the car but when the plates were due I was told I have to have the auto in my name. Since there was over 2 years of payments due, I quit paying since I was not able to licensed the car. Ford wrote the car off. It incenses me that ford would not allow me to be on the title ( my wife did not put my name on the title because it was a work car and tax purposes )I contacted Ford to make an offer on the car as Ford never repoed so I still have the car altho it is 2 years past since being written off.They refuse to deal with me. Any suggestions how I can get a title? The car was bought in Tx;

  8. Anissa, no, you should not send a letter to the creditors about the SOL expiration. There would be no point in doing this, since all your original creditors are long gone by now, and the files would all be in the hands of debt purchasing firms. You simply won’t be certain that the letters are going to the correct companies, and they would probably just ignore such letters anyway. On accounts where the SOL is expired, and there are no judgments against you, then you don’t need to worry about losing your home in the future. They could not have taken your home in the first place. If you do get sued again though, be sure to get some legal help to *answer* the lawsuit. Since it would be a “time-barred” debt under the SOL, then the court would simply dismiss that case. Regarding the existing lawsuit/judgment situation, you can verify whether there are two judgments by (a) checking your credit report in the public records section, or (b) calling your local county courthouse where the suit would have been filed.

  9. Hello Dear, i am a resident in Calif. and have very old debt that has since expired under SOL for any lawsuits-pnly one creditor sued me before the SOL expired, by september 2011 all my old debt will be eligible to be removed from my report based on the 7 year criteria. My question is it advisalble to send a certified letter to all the creditors and collection agencies advising that SOL has expired and they can no longer sue me to ensure no future further unexpected action once the 7 years has passed and if yes what is the proper wording? another question if i dont do anything and leave it alone, in the future if i own a home can they do anything againts me for these debts? Sorry…last question back to the creditor that did sue.This was Capitol one and ofcourse i ignored it and found myself with a notice of my wages being garnsihed, upon receipt of the notice I contacted the law firm and made arrnagement, when i called them they informed me that i had another judgment against me for a second capitol one card but that they would start collecting on that account once i paid the firts one. it had been so lond i didnt even rememebr having wo accounts.How do i find out if infact they do have two judgments, the Winn Law firm continue to send me letters of collection for the second account. if they do not have a second judgment what can i do to prevent them from gettimg one, the SOL has definitely expired. thanks for your time

  10. Leisa, yes, if the company has illegally re-aged an old derogatory credit entry, then you have the right to sue them. It’s probably a debt purchasing company that is responsible for this fresh entry on your report. You can try disputing the entry with the credit bureaus rather than with the company in question. And to pursue legal action, you can get some help from a NACA attorney in your area (www.naca.net).

  11. Hello I was going to purchase a home and couldnt get a loan because of a collection that was on my equifax credit report (the only one of the three) the collection date was 8/09. It was under chase but through a collection agency the original charge off date was 3/96 by chase. I called the collection agency and they were very rude and just kept telling me to pay it, it also has gained about 1,600 dollars. I sent them a dispute and validation letter and got back a piece of paper with the original creditors name written on it and the charge off date of 3/96 by chase, and that I made a partial payment to them on 9/04.? It was a law firm that sent me this signed by a paralegal. Can they reage my old debt like that and put it on my credit report and arent they suppose to give me original documentation with signatures and stuff not just a piece of paper with my name and name of original creditor after I sent them a validation letter. I live in NY and am very upset they ruined it for me and my husband to get a mortage. Can I sue these people? thanks

  12. Melody, the 4-year SOL period for CA starts from the point at which default occurs on the accounts in question. So you may or may not be beyond the SOL period depending on when during 2006 the defaults occurred. After the SOL expires, as long as you’re paying attention and don’t fall for any “tricks,” then they can no longer pursue legal claims on the accounts. At that point, it usually makes little sense to do anything further. Paying a 4-year-old collection account means a fresh *negative* entry for another 7 years on your credit report. So it makes more sense to just wait until it drops off after an additional 3 years have gone by.

  13. My boyfriend has a lot of debt from his first marriage, all in his name only. This includes a car that was reposessed. The rest is credit card debt and medical bills. This all happened in 2006. We live in CA. Does this mean he cannot be sued for any of this since it has been 4 years? We fortunantly don’t have to worry about his credit score – we are in a home not in his name and I have the cars. Most of this debt has been charged off, so I am wondering if we can just let the rest get charged off since he has no more risk of being sued/garnished – and then just wait the 7 years to have it be removed from the report. This would still dissapear quicker than a bankruptcy. Thanks for answering my questions.

  14. Julius, you’re probably getting collection activity from a debt purchaser who bought the account for pennies on the dollar. No, they can’t just add it back to your credit report because they want to. That is called “re-aging,” and it’s illegal for them to do this. Also, an account 16 years old is surely well past the Statute of Limitations for your state of residence.

  15. i got a call the other day about a car i defaulted and took back in 94…. 16 years ago. it was of course put on my credit back then but has come off and actually i have nothing on my credit now that i am aware of. can they put this back on my credit? wouldnt that be getting hit 2x for the same thing?

  16. Ron, I cannot answer this for you, sorry. You need to direct these questions to the attorney you handled your bankruptcy petition, or some other attorney located in your state.

  17. Hello, I have a question about bankruptcy and secured property. I filed chapter 7 in dec 08 and was discharged april 7th 09. I had a boat loan that i was current on through aug 09. (i could not make the payment in aug, sept.) I called the bank at the end of oct and they told me the loan was charged off at the beginning of oct. they had contacted my attorney during the bk and requested a re-affirmation of payment wich my attorney denied (???) They also moved the loan to the recovery dept even as i continued to make current payments. anyhow, when i called in oct. they told me as long as i made my payment of 750.00 the loan would not be charged off….so i did. I got a copy of my credit report and it shows the loan as a secured load that was charged off in bankruptcy with a balance of zero. I also recieved a letter from the bank stating that i had no more obligation to pay them but they may use there right to repo the boat…I do not want to do that as ive already paid 26000.00 towards the purchase of 42000.00. My question is, If i continue to make payments on the boat, my original loan contract is null and void, can they come and repo the boat whenever they want because there is no agreement? also, are they able to collect from me after they charged it off as a bad debt?

  18. Ernie, you should verify this with an attorney working in the real estate sector, just to be on the safe side that it works the same way with mortgage debt. But the way it works with unsecured debt is that a 1099-C is the end point. Whatever amount has been written off and indicated on the 1099-C is canceled debt. It means they *forgave* that amount, and you would have a valid argument that you are completely done with this account. If it was reported to the IRS as income to you, game over as far as I’m concerned. They can’t have it both ways, declaring the cancellation and then still attempting to collect on the account.

  19. Live in California, unemployed for almost 1 year. Currently on a Home Modification Program and current with 1st Mortage payment(from another BANK)

    My Credit Union sent me a 1099C for the FULL amount owed on my 2nd Mortage with Box Number 5 (Was Borrower personally liable for repayment of the debt?)marked NO

    Called my Credit Union and ask about it and they sent another copy this time Box Number 5 is now YES.

    My tax accountant said that a 1099C is a CANCELLATION OF DEBT that I need to report to the IRS as income, and I no longer owe the Credit Union, Debt is CANCELLED (~$30K).

    Credit union said they tahy are merely charging it off and I still need to pay them back.

    No clear answer yet from anyone.


  20. Kendo, since this is an active legal matter, and I’m not an attorney, I really cannot advise you here. You should discuss this matter with a qualified attorney in your state. The key question is whether Mann-Bracken had purchased the account, sued on their own behalf, and then got the court judgment — or were they merely acting on assignment to the original creditor as a third-party collection law firm. M-B worked files in both categories, so I have no idea which situation you faced when the lawsuit was filed. I’m assuming it was a purchased account, and M-B sued on their own behalf. If that’s the case, talk to the court that issued the judgment and see if they have any information on a receiver being appointed to wind up the M-B files as part of M-B having recently filed for bankruptcy. Maybe you are done, but most likely some other company will purchase the old M-B files out of the bankruptcy liquidation and start dunning you all over again. Get some help from the court or an attorney or both.

  21. I went to court in 2005 and a debt was awarded to a collection agency (Mann Bracken). I’ve been paying every month ever since (the award was for about 3x the amount that was actually owed). I just received by my February 2010 payment as it was “undeliverable” and “no forwarding address”. After doing research online, Mann Bracken, as it turns out, has closed it’s doors & apparently disappeared. I’ve tried calling various office locations and all the phones have been disconnected, as well as the addresses are undeliverable. From what I’ve read as well, they’ve fired all of their employees too. Over the course of the time I’ve been paying, I’ve asked for payment statements, but I was told by them that they do not provide them. Obviously, I’ve kept my own records fully including money order stubs, return receipts, etc.

    Here’s where the dilemma comes in:
    1) I don’t know what to do at this point because I don’t want to violate the court’s orders for payment to them.
    2) Looking at my credit report, (a) although it says it was updated February 2010, it does not show any data since April 2008 and also says “Charged off as bad debt” (shouldn’t that be changed to “paid or being paid as agreed”?.
    3) Also on my credit report under “Public Records”, it shows one of the other cases that I was involved in and paid off, but it does not reflect this particular case. Does that mean that it was never actually shown as filed and either way, what do I do now?

    **Please note, I’ve not been contacted anyone regarding this, although their doors shut down fully January 19, 2010.

    Thanks for your help!

  22. Sarah, if you were active duty military at the time the charge-off occurred, you may be able to make use of the Soldiers and Sailors Civil Relief Act, which protects our active-duty personnel from being sued by creditors while deployed. I’m not 100% sure whether the law would apply to credit reporting, but what I suggest is that you write to the original creditors informing them of their error, and asking them to delete the inappropriate charge-offs. Inform them that you were active military at the time the event occurred, and see if they will help directly by removing those derogatory entries. If not, then write to the credit bureaus with dispute letters requesting that the entries be deleted. You should be able to dispute these items off the report, but it would be better to get the original creditors to clean up their own mess if possible.

  23. I was deployed in 2005-2006. I was involuntarily extended. I had 2 credit cards.By the tme i received my mail a few months had passed. I paid the credit cards off but by then they had listed them as charge offs. I never received any letter stating that i was passed due. I even called them to inform them before i left. is there anyway to fix this. I also have a medical bill that was paid by the insurance company corrctly but is still showing up on my credit report is there a way to fix that?

  24. Donna, you have it reversed. Creditors are required to record the charge-off no *later* than six months, but they can do it earlier if they choose to. Once they received notice that you *filed* (not completed) bankruptcy, they did the charge-off at that point. Most of those accounts have probably been sold off to factoring agencies that purchase the accounts and take the payment streams coming from the court trustee. Now that you are no longer in bankruptcy though, those companies/agencies can proceed with collection activity on your accounts.

  25. Chapter 13 filed 10/09 and dismissed 12/09. after the bankruptcy dismissed i called credit card issuers to arrange catch up payments and each said they charged off (except for 2 that are current)– one said they had right to charge off due to bankruptcy filing. I explained it was dismissed and documents required not filed (couldnt afford plan payments) but it didnt matter. I thought they couldnt charge off until 6 months unpaid?

  26. Joe, yes, if you got a 1099-C for the full amount of the debt, then the creditor has given up and written off the full amount. Payment of taxes will not restart the 4-year clock on the SOL period for TX. It would take a series of payments to the creditor again for that to happen. So you should not have any SOL issues to worry about. If the form just reached you this January, that means that the creditor recorded the discharge of the balance during 2009, and it would apply to that tax year. Also, don’t overlook the potential insolvency exclusion. If your net worth is negative, you may be able to offset the forgiven amount and not have to pay tax on it. See my November 2009 blog post for further info on this topic.

  27. I received a 1099c form from Citfinacial yesterday. This is from a personal loan i got in Jan.06 for a little over $7000.I was not able to make any payments on this loan at all.I live in TX so it’s one month passed the S.O.L. The 1099c form states that the debt is canceled,does this mean I no longer have to worry about this debt if I pay the taxes on it? And if do pay the taxes on it can it restart the S.O.L. for this debt, and can they request payment for the full amont owed later? And since I just received the form,do I have to file it on this years taxes,or can I do it next year? Thanks in advance…

  28. Scott, you do present an interesting question. I doubt that the forms would be enough to overturn the judgment, but frankly, I’m not sure. This is a legal advice question, and I am not an attorney. With a garnishment at stake, I strongly recommend that you get some advice from a competent legal professional in your state. Perhaps there is indeed a path to vacating the judgment on the basis of the erroneous papework issued by the creditor. Only an attorney could say for sure, sorry.

  29. I have a unique question for you. I lost my home to foreclosure and the lender pursued a deficiency judgment. They have now gotten a garnishment against me. In the mail I first received an IRS 1099-C form on this same debt. Checked on it was box 5 (not responsible). I called the bank because I knew this was double dipping. They have now sent me ‘corrected forms’. One IRS 1099-C which has no values at all for the amounts (not even zero’s) and a form 1099-A for the full amount they received the judgment for. Again they have marked box 5 saying I’m not responsible!

    Do you believe this set of forms would be enough to get the judgment and garnishment set aside? I’m definitely being double dipped and honestly I’d rather they write it off.


  30. Jordan, the SOL in GA can be either 4 or 6 years depending on the type of contract. For open-ended (revolving) accounts like credit cards, it’s 4 years. But for an actual loan, where you had a fixed series of payments (say, 48 months) to pay off the loan, that would most likely fall under the 6-year SOL as a “promissory note” or “written contract.” So yes, you are potentially vulnerable to wage garnishment should the creditor sue, obtain a judgment against you, and seek to enforce the judgment. If the original creditor has sold the account to a debt purchaser, then I don’t see how the GA vs. OH issue would matter much. On a 4-year old account like yours though, it’s pretty doubtful the new “creditor” has the required documentation, so their threats sound like the typical posturing by a collector working on behalf of a purchaser. Try using the validation approach, where you request that they provide original documentation to prove the claim. If they go quiet, that’s a good sign they don’t have any ammunition, etc. Beyond that, you would need to enroll in one of my programs to get additional help dealing with this situation.

  31. Also, I forgot to mention that I live in GA, but my license was registered in Ohio. At the time (and I believe it still is), it was against the law for the original creditor (CashCall) to loan anyone in the state of GA credit as they were tagged as “preditory lenders”; however, they still approved me for the loan, knowing that I was a GA resident with an Ohio license. I had be living in GA for 5yrs, but never transfered my license. Am I still legally bound to pay this debt even though it was illegal for them to Target GA residents? Or was I not considered a GA resident b/c of my Ohio license?

  32. I am in charge off status from a personal loan of $5000. the debt has been sold by the orginal creditor to a collection agency that is threatening to garnish my wages. Is this possible? I can’t afford to pay it and the debt is 4yrs old. What should I do

  33. Ali, yes, you could be on the receiving end of a lawsuit. Creditors often use collection attorneys to pressure people into making payment. As to your vehicle, it’s possible they might go after that asset, but it’s not usually an issue except when you default on the car loan itself. What you should do is work toward saving funds so that you can settle these outstanding debts *before* they turn into active lawsuits.

  34. To “Hostage”:

    (1) If this is not your debt, then you cannot “reactivate” it simply by disputing it. Always send dispute letters to creditors (or agencies) by certified mail with return receipt required.

    (2) The concept of Statute of Limitations (SOL) does not apply to 1099-C. However, on a 17-year old debt, the original amount has long-since been charged off. I seriously doubt anyone would issue a 1099-C at this late date.

    (3) If it’s not your debt, then just send them a cease communication notice and be done with it. And if they continue trying to collect, sue them!

    (4) Insolvent means you have a negative net worth – see my blog post for November 2009 please.

  35. Evonne, first of all, $4,500 is not a “severe” amount of debt.
    This is an amount that you can get back under control once you’re
    working with a steady income after graduation. Also, you say that
    “they” are ruining your credit score. Not really the case,
    Evonne. *You* are the one who ruined your score by borrowing
    money without the ability to repay it. There may have been very
    good reasons that this happened, but the way credit works is that
    people don’t want to risk lending you money when they see you
    have borrowed recently and not been able to repay it!

    You can still recover good credit, although it will not happen
    overnight. You can start by working toward resolving these unpaid
    accounts. If they are beyond charge-off, then most of the time
    the creditor will have assigned the account to a collection
    agency. You can start with the original creditor, and they will
    usually tell you where the file has been sent, and then you can
    usually negotiate with the agency. On accounts past charge-off,
    aim to settle for 50% of less of the current balance, and make
    sure that you get everything in writing before you pay!

  36. Hi Charles,

    I’m currently $15000 in credit cards debt and haven’t been making any payments for a year now and collections agency has been calling me off the hook. I was just wondering if they will come after me with lawsuits if I don’t make any payments soon or come after my vehicle since its the only thing I own. Thanks!

  37. Does anyone know anything about 1) the right way to dispute an old debt that is not theirs’ without the risk of reactivating? 2) information on if there is a SOL on 1099c? 3) This debt is 17 years old, not mine and Portfolio Recovery Associates (bottom feeders) are saying it is mine from 1993. 4) What is insolvent for credit card debt? THANKS!

  38. Hi Charles:

    I am currently in College (graduating Senior) and I have racked up some severe debt. I have 4 credit cards (totaling ~$4,500 of debt) that are now listed as “charge-offs” on my credit report. I don’t have the money to pay anything now but I’m working to save up money. They are ruining my credit score! I was interested in contacting the original creditors to see if they would settle with me once I got a good percentage but I saw that you said they may not even be willing to speak with me about it. What do you recommend I do at this point?

  39. Bill, glad you’re finding the blog content useful. I don’t quite understand how you could have received a 1099-C *after* having done your taxes for the year in question, since the 1099s are supposed to reach you by January 31st. But I’m pretty sure the IRS would want that situation handled as an amended return. Call the IRS help line and ask! That’s how I gathered most of the information I’ve published on this blog regarding the whole subject of 1099-C treatment. Also, don’t miss my blog post for 11/27/09, which is about the 1099-C subject and includes some examples to illustrate, etc. It will address your other questions on income, assets, and so on.

  40. hello Charles:

    what happens if I receive a 1099-c after I file and received a refund, do I file an amended tax form for that year and pay the difference in tax, or can I claim that as income for the next tax season. Also I’m wondering if I can break it up into two seperate tax seasons (probably not). As far as insolvency say for instance you cancellation was 50k and your assets were 49k would you claim the 1k difference as income, what if was the other way around 49k cancellation 50k asset.
    I’ve been trying to research this out, but still a little confusing.
    Gotta get more info for myself before calling the tax “pros”

    Thanks again,,,,

    your blog has a ton useful info and it is greatly appreciated

  41. Bill, please refer to my blog post from November 27, 2009, where I discuss the income tax issue on settled debts. It makes no difference that the debt was incurred prior to the marriage, you will still receive a 1099-C for the forgiven portion by the end of January, assuming you fully paid the settlement amount prior to 12/31/09.

  42. forgot to mention if it makes a difference this dept was incurred before we were actually married

  43. My wife had a bank of america cc with a 10k balance that I was unaware of. When I was finally informed about it I refused to make payments for reasons out of spite. Any way after a few months we were getting the phone calls that we ignored of course , but then B of A called and offered almost 80% off the original amount. So I decided to pay it $2200 in one payment to get rid of it. My question is what happens next, what should I expect for the upcoming tax season

  44. Lynn, The SOL for South Carolina is only three years. Yes, you can dispute it, and you can also send cease communication notices to the agencies in question now that it is safe to do so. This is a clear case of “zombie debt.” Don’t fall for any of the usual tricks they might employ to trick a payment out of you.

  45. My husband has been getting several harassing phone calls by two companies that bought old settlement accounts of his (more than 12 years old). Do you know the Statute of Limitations on Cell phone and Cable bill debt in South Carolina? Can we dispute this as one of the companies is no longer in business?

  46. I’m not an expert in the area of mortgages, sorry. Apples and oranges compared to credit card debt, etc. However, by definition, a short-sale should mean that you are done with the obligations involved in the property, period. If both lenders have approved the short sale, and both will release the lien, then you should be done. I really can’t go more deeply into your set of questions because this is not the type of situation that I provide consulting services for. I recommend that you get help from a real estate short-sale professional or consult with a real estate attorney to get some answers.

  47. Hi Charles,

    My wife and I are currently in the process of a short-sale of our home, due to a recent job loss. The first mortgage has agreed to the short-sale as well as the second. Also, the second has agreed to remove the lien from the home. However, the second is a HELOC for a substantial amount. The second wants to charge-off the remaining balance of approximately 180K. The second said that subsequent to the charge-off, they (Recovery Dept.) would be contacting us regarding the remaining debt. Can you share any insight as to how this debt collection process will work? Our statute of limitations in our state is 4 years (i.e., CA).

    Thus far, we’ve stayed current on all of our payments and were wondering how the charge-off is going to impact our credit, if we continue to stay current? The home is scheduled to close in about two weeks and my wife and I have agreed to continue to make our payments on time.

    Additionally, once I’ve found employment, do you recommend us setting up some sort of payment plan with the second? If I am unable to make these payments, what recourse does the second have in collecting the debt (i.e., garnish wages, lawsuit, etc.)?

    Thank you,


  48. Jackie, it sounds like your credit report is in error. You can file
    disputes on this matter directly with all three major credit reporting
    bureaus. They are supposed to investigate and correct such errors.

  49. My home was sold in a trustee sale in 2007 at that time I moved out of the home and the house sold above the balance of the home worth but it is still being reported on my credit report as being in the forecloser process and showing an amount being owed should they show that the amount owed is now 0.

  50. Joe, you should look into the Mortgage Forgiveness Debt Relief Act of 2007,
    a law that provided homeowners with relief from tax liability on 1099-C income
    resulting from forgiveness of mortgage debt. You may or may not qualify under
    that program, depending on the timing of the write-off relative to the period
    covered by the law, the timeframe in which the mortgage was originated, as
    well as various other factors. But from your description, it sounds like
    that might be your answer.

  51. Great Blog! I have a bit of a disaster situation…Purchased a home with an 80/20 loan back in 06′. Currently going through the short sale process. The first mortgage is pretty much taking all of the money we’re getting from the buyer and only giving the second $5,000. Both mortgages are accepting the short sale and agree to release the liens on the property. But in turn our second mortgage will turn our current loan from secured to unsecured and expects us to pay on this for the next 30 years ($50,000). This is not feasible and we will be filing bankruptcy after the short sale goes through to get out from under this. However…the bankruptcy cannot be filed til next year and the second mortgage (which will now be an un-secured loan once the short sale goes through) is threatening to charge off the account (now 120 days past due). Just curious if this will create a 1099 situation or if it just means they will send it to a collection agency? If it is a 1099 situation…other than insolvency would my bankruptcy make me exempt from the 1099 filing? I know you’re not a lawyer…but your advice would be greatly appreciated!

  52. Nicole, yes, it makes sense to take the initiative and negotiate a workable
    arrangement. For one thing, it will be easier for you to negotiate a payment
    amount that you’re comfortable with before any legal action takes place. It’s
    much more difficult when you are under that kind of pressure, and the other
    side feels they have more leverage. During current economic conditions, lenders
    and agencies are much more willing than usual to accept smaller monthly payments,
    and also to stretch out the payment term for longer periods. Don’t take the
    first offer that comes your way. Take your time, as long as you’re not under
    immediate risk (i.e., local collection attorney), and haggle the best deal
    you can.

  53. Sandra, it makes little sense to me that your nephew should have to make
    payments for 2-3 years on a vehicle that has been wrecked beyond repair.
    Who cares whether or not he ever gets title for it at this point? You may
    or may not want to take a hardball approach, since failing to agree to the
    lender’s terms will result in negative impact to his credit score. But if
    credit is not an issue, then one approach would be to refuse to accept what
    the lender wants. Then they will treat this as a repossessed vehicle and
    try to collect against the loan. The account could then be settled like any
    other repo deficiency.

  54. i recently (aug 08) voluntarily had a vehicle repo’ed, I am begining the process of suing the person I had a verbal agreement with regarding this vehicle… I checked my credit report and they have written off the vehicle for $8,000… would it be best for me to get in contact with the agency soon as possible and try to begin paying it down while I persue suing this person?… I just noticed alot of people on here went for years after the repo without the collection agency contacting/suing them… and I am trying to avoid being sued and going to court later down the road… do you think the agency will reason with me and maybe give me small payments, as my financial situation right now really sucks
    Thank You

  55. My nephew’s car was in an accident and totaled. He had a loan at the bank but they nor he didn’t ensure that he had the right type of auto coverage (no collision)and the car is now only work $300 in parts. The bank wants him to convert his secured loan to unsecured and then give him the title to the car but this means that he will need to continue making payments until the original loan is paid off (2-3 more years). Is there anything he can or should do?

  56. Cindy, there’s no reason you have to negotiate right away with the collection
    company working your account. For one thing, it sounds like you really don’t
    have any resources right now to negotiate with anyway. Going through a consumer
    credit counseling organization would usually not be effective in this type
    of situation, since they tend to work on unsecured accounts that are not
    past charge-off yet. Honestly, what you really need to do is go see a
    bankruptcy attorney. If you are eligible for Chapter 7, that would take care
    of all your debts in one process. At least have a consultation or two to
    check into this option.

  57. I have a 150k heloc on a house in foreclosure. I had to move to Utah to get a job. My house is not worth enough to pay off the first loan, let alone the second. My second, Chase, charged off my loan last month and has sent it to a collection company and liened the property. My date of foreclosure is December 29th. I am insolvent, have no more savings, and much unsecured debt from trying to hang on to my business for too long. My question is, do I have to negotiate with the collection company now, even though the house is foreclosing, AND, can I go through consumer credit for this if this is the case? I have nothing but a job now and have sold everything of value to pay off some of my business debt.

  58. Linda, it depends a great deal on what state you live in and how old
    this loan contact is. There is a Statute of Limitations for written contracts
    like auto loans, but this period varies widely from state-to-state. The
    correct strategy will depend on whether you are inside the SOL period, or
    beyond it.

  59. I have a old truck loan that was charged off for $10,000. Was bought out by another company and now they are charging me well over $20,000 for the original loan amount. Then the rep said it was interest that made the account go to over $20,000. I asked for the original loan documents and they were able to fax me everything, but there is no written agreement with the original lender that it was purchased by this collection agency. I called the original lender and they said yes they sold it to this collection agency, but it’s done over the phone and there is nothing written stating these this collection agency purchased my old loan. What do I do?

  60. Renee, I recommend you sit down with a loan officer at a mortgage company
    and review your credit report before you take any action. Perhaps you
    are in good enough shape already to qualify. If not, then it becomes a
    question of whether the problem is a too-low FICO score, or a too-high
    debt-to-income ratio (DTI). If your DTI is the problem, then it would
    probably make sense to settle the old accounts, as this would resolve
    those debts and reduce the outstanding debt, thereby lowering your DTI.
    However, if DTI is not the issue and it’s just a matter of having a too-low
    FICO score, then settlements probably won’t generate enough improvement
    for that to be the right move. So meet with one or two loan officers and
    see what they recommend as needed improvements before you formulate
    your game plan.

  61. Hello, Im am trying to fix my credit so I can get a home mortgage. the debt occured in FL. I have old/unpaid credit card debt from 2003-2005. my experian report is telling me that these will stay on until @1-2011. I’ve received some settlement offers, but I am unsure what to do? Also, are 3 yr old debts worth settling? Most are medical bills.

  62. Niki, the best outcome you can hope for is to wait out the statute-of-
    limitations, which would be 6 years for Oregon. That is a very long time
    to wait, and you are fair game that entire time for legal action. Since
    you seem to be very close to qualifying for Ch. 7, I would take a closer
    look at this — talk to one or two more attorneys and see if there is
    any way to “thread the needle” and qualify for Ch. 7. That would be a much
    better strategy than trying to hide — which may work for a while, but
    is very unlikely to be effective for 6 years! If you cannot file, then
    you should work toward saving up for settlements along the way. Every account
    you get settled and handled represents one less lawsuit risk in the future.

  63. I have over $100,000 in credit card debt and stopped paying 02/09. I make $500 too much to qualify for Chapter 7 and I don’t want to do a Chapter 13. I have no assets but I work. I don’t have any money to settle these debts. I live in Oregon, but have my bills sent to a TX address now. What is the best outcome I can hope for? What can I do?

  64. Adam, older judgments can indeed be settled, but I cannot possibly
    predict the outcome in advance. Maybe 70% is do-able, perhaps you can
    do even better, so I would certainly start well under 50%. But there are
    numerous variables involved, too many to discuss via this blog. And I
    don’t provide coaching via this forum anyway. That’s what my program
    itself is for!

  65. Okay. My wife and I recently found that she has a judgment against her first filed back in 2003 on a repo’ed car. It was around 6k, we saw this a couple of months ago, and then her sister brings us a writ of garnishment notice that went to her parents house where she lived in ’03, this was dated as May 2009 and the debt has ballooned to 12k. With the right to garnish will they settle something that is 6 years old for about 70% of the original judgment? I think the 5k in interest, while valid is BS. We didn’t even know this was still out there for the last five years. They obviously do not know where she works or our bank accounts because there has been no garnishment. I want to take care of this but I can’t afford 12K. Thoughts? Should I offer to settle for half of the original debt plus all fees incurred trying to collect? I would think at this point that would be a sweet deal for them.

  66. Yoni, sorry to hear of your situation, but it does seem unlikely that the
    creditor would be able to pursue you for this claim. It seems more of a
    problem for the new business owner. I can’t provide any specific advice
    or direction without knowing more detail about the nature of the business,
    the terms of the sale, and so on.

  67. Hi Charles – great blog – thanks for your dedication. My situation is that I owned a business and Wells Fargo approved a line of credit with my personal guarantee. The business had to be sold to a secure creditor. I have just been approved as a disabled veteran and I have no assets and of course no job and I am homeless. I sent Wells Fargo a “comprehensive letter” covering do not contact me, do not contact third parties, disputed the debt in part and whole, asked for validation, and gave them an address to contact me. The certified letter return receipt has not shown up even though it is more than 3 weeks. Wells Fargo appears to have assigned/sold/or employed a debt collector who are now haranging the new business owner along with all the usual threats. All the phone numbers are on the web as rogue numbers of unlisted debt collectors. I have filed a complaint with FTC and the state attorney general. You may have some really targeted suggestion. Thanks Charles and God bless.

  68. Violet, it all depends on the creditor, whether or not the account
    has been charged off by the creditor, what agency you are settling
    with, and so on. As I just noted in the above comment reply, I cannot
    advise people on specific debt negotiation situations via this blog.
    That is what my program is intended for!

  69. Hi Charles,
    I want to settle one of my credit card accounts. I owe 15K and was told I could settle for 6K/ The problem is that they want all of the money right now. Can I try to negotiate a monthly payment for $1K per month for 6 months?


  70. Jennifer, this sounds like a debt purchasing situation, based on the
    tactics used by the agency calling you. It may still be owned by Chase,
    but without an identification of the company calling, it’s impossible to
    determine with certainty. Beyond that, I really cannot advise people
    on specific debt negotiation situations via this public blog. That is
    precisely what my program is for.

  71. Hi,
    I have $20K in debt with Chase. I was on a repayment program but then couldn’t pay the $300 so I think it recently went to collections. i received 3 calls from a company, but they do not say who they are, but they have all of my information.They even called my neighbor trying to get a hold of me. They also said that this account is in default and my chase auto could go to default because of this. The person I spoke with said that a claim has been made against me with the state and that I can settle my account for $6600. I asked them to send me this information in writing they said that they can’t do that.

    I’d like to settle for less than $6600 plus something seems fishy.
    What is my best alternative?
    Thank you

  72. Bennie, I’d simply leave it alone and do nothing at this point. You’re 6
    years through a 7-year wait for it to drop off your credit report. If you
    try to settle it at this late date, you’ll just be purchasing a fresh
    7-year ding that will *lower* your score rather than raise it, when it will
    otherwise disappear on its own in another year. And even if the account was
    sold to a debt purchaser who’s placed their own entry on your report, a
    settlement with the purchaser would not affect the original charge-off
    reported by the creditor. In this case, the correct strategy is to do —

  73. Hello Charles, I have a charge-off from Applied Bank. According to my Transunion report it is scheduled to be removed in 09/2010. The amount of the charge off was $1110.00. It is still showing a balance of 1110.00. Is there anything that I can do to improve this account? The account was charged off as bad debt.

  74. Kathleen, what I suggest is that you first have a couple of consultations
    with local bankruptcy attorneys. Find out whether or not you are eligible
    to file under Chapter 7 so you can just fully discharge the debt. I can’t
    say whether or not you are still exposed on the mortgage deficiency after
    auction, because that depends on the type of mortgage contract it was, as
    well as the specific foreclosure rules for your state. Here again, you need
    some input from a local attorney. Do this before you even consider debt
    settlement, because if you do qualify for Ch. 7, then it would probably be
    a better solution (to include the mortgage write-off) than settlement
    on the cc debt with the mortgage potentially unresolved.

  75. Charles, I went though foreclosure this year. The house was auctioned for $210,000 less than I owed. $70,000 of that was a equity line of credit. I currently owe $28000 in credit card debt. I have been looking into either a debt settlement on the credit card debt or filing for bankruptcy including the home equity. What would you advise? Thank You for taking my question.

  76. Connie, what I would do is go talk to a local attorney. You are asking
    a question about a legal matter — I’m not an attorney and cannot
    provide legal advice on this blog. The rules on mortgage obligations,
    relative to bankruptcy, vary from state to state, so you really need
    an opinion from local counsel anyway. Perhaps you can start by phoning the
    attorney who handled your bankruptcy petition.

  77. I filed bankruptcy in October of 2008 and was discharged in Feb of 2009. I kept my home. My home has a 1st and 2nd mortgage, (HELOC from a different bank). I am again unemployed. Am I still liable for the 2nd mortgage? I don’t think I can qualify for loan modification as I have no income. I really want to keep my home. Both the 1st and 2nd mortgage pretty much wash out any equity.(infact I’m upside down) Can’t afford to pay both though) What would you do?

  78. Kenny — yes, and you should make that a condition of the written
    agreement negotiated with the creditor. Get a confirmation letter from
    them first, that states if you pay the amount agreed upon, the loan
    will be satisfied, no further collection activity will take place, and
    they will transfer the title into your name once the payment has cleared.

  79. Quentin — if you have a judgment against you, then you are legally
    liable for the value of the judgment, period. The reason there is both
    a charge-off entry as well as an entry for the judgment on your credit
    report is simply because the charge-off is reported in the regular section
    of the report, while the judgment usually appears in the public records
    section of the report. They cannot “force” you to pay any amount other
    than the face value of the judgment, plus interest at whatever rate
    judgments accrue interest in your state. This no longer has anything
    to do with the charge-off. It’s the judgment that needs to be resolved,
    so you are not at risk of wage garnishment (assuming you live in a
    state that permits garnishment – most do, TX and a few others do not), or
    at risk of a levy on a bank account, etc.

  80. I have a car loan that was charged-off. I have not been threatened with repossession and the account has not been placed into collection. I have a great opportunity to pay off this loan and I am going to do that. When I pay it off, even though it is a charge off, do I still get clear title of the car?

  81. I had a car repossessed in 2003,the back charged it off in 4/04 they then recieved a judgement in 6/04. I tried to contact them to settle the judgement amount only and the said no but if I pay the judgement amount in full they will forgive the balance of the charge off after judgement. Now first can the judgement and the charge off both be on my credit report for the same account? Then if they get a judgement on that account for less than charge off amount can they force me to pay the balance?

  82. Paula, yes, the car can still be repossessed. Yes, you will have a problem
    renewing the tags.

  83. I have a car loan through Navy Federal they charged off the account and i wanted to know can the car still be repossed and have Navy federal closed the account. Will the charge off keep me from renewing my tags.

  84. Marlon, you will have to work with the agency that Capital One assigned the file
    to, as the original creditor will no longer speak with you after they have
    assigned it. Wait until you receive a formal collection notice in the mail,
    so you have the right contact info to work with — then call the agency and
    haggle a settlement.


  86. Giselle, the CT agency that sent that letter is a collection attorney firm.
    Since they are located in your state, there is risk that they will soon file a
    lawsuit against you on behalf of Capital One. Writing letters to your creditors
    is rarely an effective strategy these days. Talk to the agency handling the debt.
    Explain your situation, and try to work out a solution before this becomes a
    judgment against you. It’s often possible to negotiate settlements with such
    agencies, although based on what you describe of your situation, you may need
    to negotiate a workable payment arrangement instead of a settlement.

  87. oops. i forgot to say that my card has been charged off

  88. I’m not denying that I have debt and I was making small payments, but i had to stop because I got laid off of work due to the economy. Capital One sent my account over to a collection agency & then the cc company sent me letters from them directly. After awhile, i get a letter in the mail from a firm, London & London, in Connecticut…which is where I live. Their letter basicly says the same thing that a collection agency would say. I have sent replies back to them (both Capital One and the lawfirm) saying that I have been laid off, but as soon as i get a another job or hopefully get called back to my old one, i will start making payments (I didn’t put down an amount) again. Now, as far as the firm goes, should I be even more worried that they contacted a Connecticut firm? I was making tiny payments so it’s not like i’m totally ignoring the debt, although, that might not matter to them. I do not own a home or a car, but i have a regular savings account & i live with my mom, but she’s disabled so she can’t work.

  89. Stephanie, the charge-off itself is just the creditor formally declaring the
    account to be a loss on their books. Collection activity after charge-off can
    take place in any state regardless of what state the debt originated in. The
    rules vary from state to state with respect to recovery on delinquent mortgages,
    and some lenders pursue aggressively while others do not, depending on what
    they are permitted to do within the state’s regulations. Regarding judgments,
    yes, you are supposed to first be formally “served” with the lawsuit (summons
    and complaint), and you then have 20 days (30 in some states) to “answer” the
    lawsuit and defend yourself. Sometimes they do not properly serve you, however,
    and it would therefore be a good idea to call the courthouse in FL where you used
    to reside to see if any legal actions have been filed against you. Ditto in NY
    where you currently live.

  90. I called BB&T to do an inquiry about the second mortgage on a house that is under my name in Florida, I live in New York State. They informed me that the account was charged off in February. I never received any type of notification from them referring to this charge off. Do you know anything about how a charge-off is handled if it is in another state other than the one you live in? And, do you have to receive notification from a court, so you can defend yourself, before a judgement is placed against you?

  91. Suzette, yes, the car could still be subject to repossession by the lien holder,
    even in a different state from the one in which you purchased the vehicle.

  92. If a car was purchased in another state and it’s now reported to the credit bureau as a charge off. My question is, If someone moves to another state, could it still get reposessed even if the car has been in charge off for 1 year?

  93. Sally, it’s permissible for both companies to place an entry on your file,
    provided the purchaser did not “re-age” the entry and make it look like a
    brand new account under the “date opened” field. If you settle with the purchaser,
    they may agree to remove their own entry, but this will have no effect on the
    charge-off as reported by the original creditor. If the purchaser agrees to
    remove their entry, make sure you get this in writing before you pay.

  94. So if I have charged off debt that was sold to a new collection agency, but it appears on my credit report more than once (reported by the original creditor and also by the new collector,) which one should be on my report? Also, if I pay the debt, and want a “goodwill removal,” do I ask this of the new collector, or the original creditor? Thank you!

  95. Michelle, charge-off and receipt of 1099s are not the same thing. A charge-off
    is not the same as formal “forgiveness” or “cancellation” of the debt in
    question. So no, you would not necessarily have received a 1099 just because
    the creditor recorded a charge-off on the account. Form 1099-A is for “Aquisition
    or Abandonment of Secured Property,” while 1099-C is for cancellation of debt.
    You’re correct that I am not a tax expert, so you should follow up with one.
    However, my understanding is that 1099-A would be more applicable to a mortgage,
    and would also qualify under the rule change passed last year by Congress that
    granted tax relief for forgiven mortgage debt.

  96. Charles, thanks you so much for the advice. I do have one other question for you regarding a 1099. I should have received one from them when they ‘charged off’ the account, right? I know a 1099C is for cancellation of a debt, but do you know anything about a 1099A…what the difference is? I’ve been reading somethings that say you could get either of those. I know you are not a tax expert but from reading your blogs you have a lot of useful information so I greatly appreciate any information you do have. Thank you!

  97. Michelle, what I suggest is that you call Bank of America and request a
    zero-balance letter on the account. It sounds like their computer system is
    still incorrectly generating billing statements on an account that has been
    declared an official loss (i.e., charge-off). See if they will go in writing
    to you that the balance is zero. That way, if you do begin receiving calls
    later from a collection agency, you can put a stop to any further collection
    effort by sending the agency a copy of the zero-balance letter.

  98. I am confused and wonder if you can provide me any information…my situation, i was foreclosed on 10/2007, i had an 80/20 mortgage, the first mortgage with Chase and the second with Country Wide. According to my credit reports, Country Wide charged the account off in 10/2007, the account currently shows it was closed as of then and the amount due is $0. since then they did continue to send me bills but i was unable to pay, then just recently my bills showed up as coming from Bank of American (as they bought Country Wide). So i spoke with them on Monday and they wanted to figure out a payment plan which i made clear i could not do as I’m unemployed. I talked to them again on Friday and they are telling me the status of my account is closed with no monies being owed, in fact they told me that they can no longer do anything with the account. Asked them if someone else owns the account now and the response was no. Why am i still receiving bills if I call and they tell me the balance is zero? Should I expect to hear from a collections agency? Any advice you can provide me to get this cleared up would be wonderful. Thanks!

  99. Bruce, I’m not a mortgage expert, so these are my best-guess answers on
    your #1 and #3 questions. The charge-off of the delinquent mortgage should
    not have any effect on whether or not the lender approves the short sale. As
    long as they still own the account, and have not sold it to a purchaser, then
    they have the legal authority on the account and can therefore approve the
    short sale. On the second mortgage against your primary residence, what I’ve
    been seeing are a lot of “pseudo-settlements,” where the second lender accepts
    a settlement amount, but then refuses to release the lien on the property. In
    my opinion, that doesn’t really resolve the matter fully. You would need to
    consult with a real estate attorney familiar with the foreclosure and/or
    collection rules for mortgage deficiencies in your state of residence, in order
    to see whether or not it would make sense to let go of the second mortgage.

    Regarding the credit card debt of $40k, the answer is, “Maybe.” It depends
    on a lot of other factors. Settlement is a bankruptcy alternative. If you
    are in bad enough financial shape that bankruptcy is something you’re considering,
    then it usually does make sense to evaluate settlement as an alternative.

  100. What a great forum! Charles, I need your advice here! I’am trying to do short sale for my second home. Yesterday the second mortage company told me that they plan to charge it off since my delinquency time is over 180 days. My question question is, if they charge it off, can they still approve the short sale?

    My second question is, I also have $40k credit card debt, but I’m current on the payments. Since my credit is already crap now, should I simply default and wait for them to charge off and settle for much less in future?

    My third question is, for my primary home, if I stop paying the second mortgage, they’ll likely simply charge off in future instead of foreclosing due to the negative equity, do you think we can settle with them for less without selling the home and get rid of their lien?

    Thank you very much for help!

  101. Charmin, sorry to hear you’re unemployed. It sounds like the vehicle is
    definitely at risk of being repossessed. The lender *already* has a lien against
    the title to the vehicle, so that won’t change just because of the charge-off.
    All you can do is continue looking for work, so you can work out a payment
    program with the lender that avoids repossession. Meanwhile, understand that
    repo people are usually pretty ruthless. They will take the car in the middle
    of the night, *assuming they can find it*. People trying to avoid repo of a
    vehicle become very familiar with “creative parking arrangements.” I’ll leave
    it at that!

  102. I owe 16,000 on my car loan and I have been unemployed the last five months. My car payment is 489.00 my unemployment checks were 500.00. I have other bills and I refuse to turn my car in because I need it and why would I give it back on;y for them to seel it and I have to pay the difference when I keep telling them I have a new job and I can get back on track. I havent made a payment in 4 months and now they’re telling me that it’s going to charged off. I told them that I can make a full payment on Friday and they won’t except it. What should I do??? Then I was pulled over a couple of times and I’m just wondering of when the finance companies put out repossession orders for your vehichle do they automatically tranfer the title?


  103. Cat, it’s not the collection agency charging interest, but Citibank.
    Some creditors stop inflating the balance at the time of charge-off; others
    do not. But as far as I know, they have the right to continue accruing
    interest on the account based on the original contractual terms. Since
    it’s already charged off, you may want to consider trying to settle it for
    less than full balance.

  104. Hi, My Citicard Master Card has recently been charged-off, and the account sent to a collection agency. They said that they cannot put me on a payment plan with the $200 per month I offered them , and that the account would continue to accrue interest. They said that this is Citibank’s rules, not theirs (that they cannot put me on a payment schedule until my account is more current?). And I can’t seem to find anywhere online the New Jersey law for interest accrual. Could you perhaps tell me if the collection agency can still collect interest if I am a New Jersey resident? Many thanx, Cat

  105. Naomi, I’m not a tax advisor, sorry. I am not sure how the 982 would be
    handled in that situation. Please consult with a tax profesional, or just
    call the IRS directly and ask them.

  106. Hi. I just had another follow-up question. My original question concerned the American Express card that I settled in 2007 and the tax bill I received. You mentioned that I should be able to file an amended tax return, and include the 982 form. Can I still do this even though at the time the debt was cancelled, my father still claimed me as a dependent? I filed my own taxes, but he did claim me as a dependent on his. Will they also consider his assets then on the 982 form, or just mine? Thanks.

  107. Lisa, yes, you “settled” with Hilco for less than the balance claimed at
    time of settlement. The difference of $1,409 (apparently) was the amount
    forgiven and reported via 1099-C to the IRS. That amount is treated by the IRS
    as ordinary income and must be declared. However, there is an exemption
    if you were “insolvent” at the time of settlement. Insolvent means you had a
    negative net worth (debts greater than asset values). If this was the case
    at the time you settled, then you should be able to file an amended return
    for 2007 to include Form 982 to claim insolvency. Please consult your tax
    professional for advice specific to your situation.

  108. In January 2007, I settled with Hilco Receivables for $1,872 on a Bank of America account. Today I got a CP2000 notice from the IRS saying they believe I owe $372 in taxes because I never included the 1099 Hilco should have sent me. Beyond being royally PO’d and shocked that I could owe further money because I settled and paid off a debt (isn’t that what you’re supposed to do, not just let them charge it off), I’m now regretting that all my transactions were conducted over the phone and so have nothing in writing from Hilco saying that I paid off this debt in full. Hilco reported $1,409 to the IRS – does that mean that amount that was still owed and in fact, they settled with me for less than was owed (while telling me I was paying off in full)?

  109. He did have legal assistance but it wasnt very good because the attorney never showed up on the day of there hearing. He really got it stuck to him on this one! Thanks for the help.

  110. Cheryl, yes, this is double-dipping for sure. The customer should have responded
    to the lawsuit with evidence (in the form of the 1099 from the original creditor)
    showing that it had been canceled thereby, and also with evidence that taxes
    had been paid against the 1099 income. Had it been properly defended, the debt
    purchaser would not have been able to prevail. As things stand now, if there
    were no deadline involved for the refi, the best strategy would be for the
    customer to obtain legal assistance in getting the judgment and writ of execution
    vacated. Absent legal measures, there’s no way around the existence of the
    judgment, unfortunately.

  111. I am loan officer working on a refinance for a customer. The title company discovered a writ of execution on the customers property for $14,000. In 2007 a credit card company wrote off the balance as a bad debt and the customer received a 1099 for the balance and had to pay taxes on that amount. The credit card company then sold the debt to a law firm and they filed a judgement and placed a writ of exec. on all of his property. We will have to pay the debt in order to complete his refinance but isn’t it like he is paying for this debt twice since he had to claim it as income and now he has to pay it in full? I am trying to help him so he doesn’t have to pay more than he was supposed to.

  112. Naomi, I’m not a tax person, so you should verfiy the following advice
    with a CPA or qualified tax pro. You should be able to file an amended tax
    return for 2007 to include the Form 982 for declaration of insolvency. If you
    had no assets at that time, and also owed $40,000 in loans, then the $9,000
    that was forgiven on the Amex account can be offset in full. You should therefore
    not owe any tax for that year on the basis of insolvency. On your follow up,
    no, if you settled the debt via the collection agency, then there should be
    no further collection activity on the account.

  113. Also, since American Express did write off the debt and report it to the IRS, can they still contact me, asking me to pay the $9,000? Thanks.

  114. I had a $18,000 credit card debt with American Express in 2007. They sold the debt to the collections agency in June 2007. I paid approximately $9,000 to the collections agency, and on my credit report it says “settled.” However, I was a college student at the time, and I did not report the approximately $9,000 that American Express wrote off as income on my tax forms because I didn’t know I had to. I received a tax bill from the IRS last week, taxing me for the $9,000 that American Express wrote off. I now have a tax bill of $1,400. I never received anything from American Express but this may be because I moved several times in the last year and any forms may have gotten lost in the mail. Regardless, at the time the debt was cancelled, I had no assets and I had credit card debts and student loans totalling $40,000. Can I file a 982 or is it too late since I would have had to do it in 2007? Thanks.

  115. Karren, I’m not a vehicle title expert, but it sounds to me like the DMV in Texas
    is simply disorganized and issued the clear titles in error. Either that,
    or the lenders failed to record their liens properly. That seems unlikely though,
    so it’s probably just bad record-keeping at the DMV. The Statute of Limitations
    is 4 years on written contracts in TX, so if they get through 4 years
    without a judgment for the repo deficiency, it’s probably a moot point after that.

  116. I have a friend who recently stop paying on their vehcile a couple years back and had 3 years left to pay…however, he kept getting pulled over by police for speeding and was scared they would take the car back ond would find out that it was in repossession state. He finally filed and filled out paperwork for lost title and received the titles for the vehicle he owed three more years on. I live in Texas. My brother who is in the military did the same thing but they tried to reposess the car and he came out with the title in hand and of course they had to put it down. Bothe parties have a chrage off on their credit for the cars…how is it possible that they are getting clear titles for these cars….Texas

  117. Kim, yes you can fight this. It sounds like a junk-debt buyer has taken over
    the account. Most states have a Statute of Limitations on credit card debt that
    is 6 years or less, although there are a few states with longer SOL periods. If
    the debt is “time-barred” under the Statute for your state, then you still need
    to answer any formal lawsuit. If it’s less than $1,000, they may be coming
    at you through small claims court. Find out where you stand on the SOL period
    before you do anything else.

  118. I had a old debt way over 7 years it’s been off my credit report for years, now they are trying to sue me for the old debt through a third party can i fight this. It’s less then 1,000.

  119. Nancy, the old debts that you paid may or may not come off the report on the
    same dates as originally indicated before you recently paid them. It depends
    on the entity involved and whether they are reporting in the first place. What
    I mean is that it may be that debt purchasers bought the accounts and that’s who
    you paid (as opposed to the original creditor), and not all debt purchasers report.
    Sometimes it’s actually worse to pay a very old account, because it
    sometimes results in a fresh entry (that will last 7 more years) showing “paid
    collection account.” What you should do now is dispute anything that is not
    accurately reported. Also, don’t wait a whole year to begin applying for new
    credit. See if you can get approved for a small unsecured account, maybe with
    $1,000 credit limit. Or you can start out with 2 or 3 secured cards, where
    you make a deposit that the creditor will match in credit. You can shop these
    types of offers via http://www.cardratings.com. The sooner you begin adding back
    positive payment history to your credit file, the faster your FICO score will

  120. Hi, I recently got a copy of all three credit reports which, of course, showed who I owed, how much I owe,and the estimated date the item will be removed. Thanks to income taxes I received, I was able to pay off all my old,bad,charged-off debts totaling $3,600 that I accumulated in my early 20’s. I got married one year ago, and we would eventually like to buy a house. We are trying to improve our chances of getting a good, low-interest mortgage. We own a condo which is worth approx. $120,000, if I had to guess. So I guess my questions are: Are the dates that state when item will be removed still be somewhat accurate now that I paid off the debts? Other than working on his credit report, which we are starting to do now, is there anything else we can be doing to get the best possible rates? And, finally, since I paid off my debts, which closed the accounts, should I try in another year or so to open a new account that will be used for small purchases, such as gas for vehicles, and paid off every month? Or should I wait longer? Or not open one at all?

  121. Terrie, you can have your day in court, certainly, but the likely result
    will still be a judgment against you. I recommend you seek assistance from
    a qualified legal professional. See if there are any free or low-cost legal
    aid services in your area, and call and get some help to defend yourself!

  122. Due to medical issues and now the economy i could no longer afford my leased
    vehicle so I returned it to dealer. After chrysler auctioned it off they sent
    me a bill for $9000.00 of course i cant pay this. so I would be greatful for a
    1099C at this point but they have sent it to collections.If they sue which they
    have threatend can I bring all my bills and paystubs to court and show the
    Judge that i just dont have any extra money. I fighting to keep my mortgage
    paid up monthly

  123. Judy, the SOL in Alabama is 3 years for open-ended accounts (like credit
    card or revolving credit lines) and 6 years for written contracts that are
    not open-ended accounts. So if this is a credit card debt, you’re probably
    being sued by a debt purchaser. It is imperative that you answer the lawsuit
    correctly, so get some help from local legal aid services to answer correctly
    and defend yourself. If they get a judgment against you by default, the SOL
    no longer applies.

  124. I had a credit card in 2003 that I stopped paying due to illnesses…on my part and on family members. I just need to know the SOL for the state of Alabama. I think the last payment was in April of 2003. I am being sued and I intend to reply within the time alloted but I don’t know where to start. Due to a fire the original documents wre destroyed. Any help will be appreciated.

  125. Dee, if you are unable to settle the larger accounts, eventually they will move
    to outside collection agencies and possibly local collection attorneys. So I suggest
    you see if there are any legal aid services locally that could assist should one or
    both of these accounts escalate out of control on you. Regarding the tax issue,
    please refer to IRS Publication 908, page 21, which discusses how to file an exemption
    due to “insolvency”, so you don’t have to pay tax on the 1099-C amounts. Insolvency
    means you owe more in debts than you own in assets, and you have the right to offset
    the 1099-C amounts up to the amount by which you are insolvent. Seek help from a tax
    professional when you do your taxes for tax year 2009.

  126. I was laid off 6mths ago and have not been able to pay my 6 credit cards. I am now in the process of settling 4 of them with a min payment of $500, 429, 275, and 194 to settle with my tax refund.The last two credit cards are Discover and Bank of America,they want to settle w/1800 and 1150, which I cannot afford to settle. What will happen if I prolong this debt, due to lack of funds. I am now on welfare assistance, because there is no jobs. I am barely getting by…..
    Will I have to file a 1099 next year or owe anything on the 4 CCs I did settle? What are the specifics of 1099 with the IRS?

  127. John, the only “double-talk” here is that coming from you. But since you don’t seem to understand the difference between a “tax exemption” and a reduction in taxes due to declared losses, I suppose that’s to be expected. Look, this is not rocket science here. Creditors have the legal right to sell a debt to a third party, who then has the legal right to collect on it. The revenue received for the sale is recorded on a different part of the ledger, thus there is no tax offset involved in that part of the transaction. Just as you have the right to sell your car to a third party, banks have the right to sell their receivables to a third party. As to “examples” of lawsuits where collectors have prevailed, there are many millions of said lawsuits. Do your own research if you don’t believe me. Pick just about any venue in the country you like, and do a search on any one of the major debt purchasers. You will find numerous lawsuits decided in favor of the purchaser. If you believe otherwise, then you must be a tin-foil-hat-wearing conspiracy kook — in which case you posted on the wrong thread. See my post from 11/14/08 for further entertainment on this subject. 🙂

  128. you did a double talk on the tax exemption for credit card charge off. they get the whole amount as a tax exemption. the economics department of Indiana University shows you the two ways to achieve it. where is the law that says a third party independant debt collector sueing for his personal enrichment and not for the credit card company is legal to do so. the third party independant debt collector has no legal entitlement. but the defendant has to show up at court to rebutt or be slapped with a judgement. your example of all the lawsuits needs clarifications. in closing its illegal to buy or sell illegal drugs but is done every day

  129. Thanks for your response. I agree in investing dollars with an attorney to provide guidance on this case.
    Once again, thanks.

  130. Nichele, credit cards are normally considered open-ended accounts because they
    are not a loan with fixed terms like 48 months or 60 months, but rather revolve
    indefinitely. Essentially, “open-ended” = credit card account. If you last paid
    in April 2004, 5 years brings you to March/April 2009, which is probably why
    you’re getting sued now, before the SOL expires. One strategy would be to “answer”
    the lawsuit with help from a consumer attorney, delaying any default judgment
    until beyond the expiration period. But you have to get legal advice specific
    to the rules for your own state. With $20k at stake, invest a few hundred
    in an attorney consultation!

  131. I received a summons for a judgement of $20,529.17 for a credit card. I am trying to understand while
    researching the statue of limitations for Illinois. Open-ended account is 5 years and written contract is
    10 years. The last payment was made in 4/2004. Some of the information I have come across indicate that
    credit cards is open-ended; I have seen where written contract is a credit card. I am seeking which one is
    correct, open-ended or written for credit cards. It appears that I am screwed with this. $20, 529.17 that
    is a lot of money to pay for something that an attorney bought for pennies.

  132. Anne, you should be able to obtain statement copies by simply writing to the
    creditor (via certified mail) and requesting them. I’m not an attorney, so
    I cannot provide legal advice. However, my understanding is that you have the
    right to request such documentation via the “discovery” process if you are
    involved in an active lawsuit with the creditor. See if you can get some advice
    from local legal aid services on how to do this.

  133. I have a “charged off account” and am in need of my credit card statements to defend my case (I can’t afford an attorney’). The creditor’s policy is NOT to display them on-line anymore (because of charged off debt). How can I obtain them?

    Thank you.

  134. Christine, if the credit report shows that it was “paid, was a charge off,”
    then yes, most likely the other party simply paid off the debt, and that
    fact (along with the original charge-off status) is being reflected back on
    your credit report (because you co-signed).

  135. Val, you need to get help from an attorney or local legal aid services.
    Normally, when a tax refund has been garnished, that doesn’t have anything
    to do with an unsecured debt, but rather some other obligation owed to the
    state government itself, or some other court-ordered debt. If this is a regular
    unsecured debt that’s involved, then it sounds like the creditor already has a
    *judgment* against you. Otherwise, they would not be able to garnish. And a
    judgment overrides any SOL period, so the 6 years no longer applies.

  136. I am still in possession of a vehicle reported as a charge off through ford credit…the question is, a family member was a cosigner on the loan..I have not had any contact with my family for almost two years, the loan is now reported on my credit report as “paid,was a charge off” and checking on the NYS dmv website I have discovered that there is no longer a lien on the vehicle…does this mean that the loan has been paid off presumably by the cosigner?


  138. Lori, I’m not a tax expert, but I’m sure that you don’t have to pay taxes twice
    on the same obligation! Confirm this advice with a tax professional, but my
    advice would be to use Form 982 to claim an exemption, along with a cover letter
    explaining you already declared the income in 2005.

  139. I had Chase charge off a debt on a 1099 for the tax year 2005. I claimed the whole amount of 9,612 on my taxes as income that year. Today in the mail I get another 1099 for the exact same account saying $8,761 was charged off. I have no clue what to do. I went through a bad divorce and I have tried to do what I can about all of this. Does anyone have any idea what I do now? I have already filed my taxes for 2008 so I could do my son’s college FAFSA. Any advice would be greatly appreciated.

  140. Jean, I’m not able to comment any further beyond what I said above.
    Please get yourself some help from a local legal professional.

  141. Sorry one more comment . None of these action were taken through court. They have all been done through Green Tree themselves. They went in and took the home they sold the home.Now they are seeking the remaining money. We dont live in that state we are in AR.

  142. It was a mortgage loan. 15 year through Green Tree. The state was MN.

    Thank you for the advice and help. I have been reading and reading. I had a feeling that they couldnt collect on the loan because they took our home and sold it. I will look into the advice you recommended.

  143. Jean, yes, the creditor can still attempt to collect after charge-off. That
    was the whole point of the original post above. When the mobile home was sold,
    the amount remaining (above the auction proceeds) became what’s called a
    “deficiency.” What I’m not clear on is whether you financed the mobile home purchase
    via an actual mortgage, or some other type of financing contract. This can
    make a difference in many states, because mortgages are usually “non-recourse,”
    meaning once the foreclosure takes place, there is nothing further the lender
    can do in terms of the legal process. In other words, they can only try to collect
    by telephone calls and letters, etc. I don’t know for sure that this is your situation,
    however, because it’s not clear what type of contact this was. What I recommend
    is that you get a legal opinion pertinent to the property rules for your state.
    See if there is a local legal aid service that can advise you at low or no cost.

    Regarding the 1099-C, there is an exemption for “insolvency,” so you can claim
    an exemption if you owe more in debts than you own in assets. Please consult
    a tax professional for further guidance.

  144. I have a charge off on my credit report for a Mobile home that was foreclosed on and sold in a quick sale($250..alot less then what it is worth) The lender never has sent me a 1099-c. Last year they sent a letter notifing us that they were contacting an attorney in our area.They said they didnt want payments they wanted the full amount. We never heard from anyone till the middle of 2008. Which was from the lender trying to collect. He said he would take $1500. We still owed 12,000. We couldnt do it so he said we could pay $40 a month for 6month then make another deal. Well 6months is here and the lender called we gave them an offer and they said NO WAY they wanted atleast 7000. We cant do that amount and asked to make payments she said no that would be unexceptable and our offer which is what the first person offered she said was a slap in the face and that was a one time offer. My question is to you…Can they still collect from us even after they sold our mobile home and put a charge off on our credit report? I know they never gave us a 1099-C but they did sell our home? Also sorry one more question. If they ever do send a 1099-C will we have to pay taxes on a mobile home debt? SHe mentioned this time that she would report this to the IRS ..she said alot of things ..I know it was to upset us. Lets just say she was the one hanging up the phone. She was wanting it all or nothing!

  145. TJ, if you are about to be garnished, then you need to see an attorney
    immediately. However, nobody can garnish you for more than you make, or
    even a full paycheck. I’m not aware of any state that permits more than
    25% of net pay to be garnished. So I suspect you’re being subjected to
    some collection bluffing. If the law firm is located in your state, then
    you need to get yourself some legal assistance asap. See if there are any
    low cost legal aid services in your area that can help with advice.

  146. hey ,
    i have a good qestion lawer wants to garnish my wages in the amount of
    2200 a month from my employer i dont even make that much.this is for a vehical
    loan that i was a co signer on from 2002 witch my ex still has i think!
    they also added intrest on top of the loan witch now is 10,000 from 6,000 loan
    what do i do

  147. Chris, the SOL period no longer applies once a creditor obtains a judgment
    against you. The SOL period is the window in which they can bring legal action.
    If they have already done that and obtained a judgment, then the SOL is no longer
    a factor. In most states, judgments are valid for 10 years, and can usually be
    renewed for an additional 10 years. So there is no “expiration” on a judgment.
    But TX doesn’t permit wage garnishment, and if you have no assets and no bank
    account, then there is no practical way for them to enforce the judgment. What I
    recommend is that you build up savings until you are in a position to settle it.
    If enough time goes by, you can usually get old judgments settled at 50% or less.

  148. I’m in TX-does the SOL still apply if a creditor gets a judgment? I’m wondering if its better to just wait out a judgment’s expiration rather than filing bankruptcy as they can’t take anything if you don’t have any assets and no bank account.

  149. Eva, it means that you had a vehicle repossessed, and the amount written
    off (= charged off) by the creditor was $9,139. This is known as a “repossession
    deficiency,” which then becomes an unsecured debt that the creditor will
    usually try to collect on.

  150. Please explain what does “Account charged off/Repossession. $9.,139 written off” means.

  151. Steve, there is nothing about the charge-off event that prevents you from
    including a debt account in a bankruptcy petition. Charge-off just means that
    the creditor has formally declared the loss, and it does not directly affect
    your ability to file bankruptcy one way or the other.

  152. Once a debt has been charged off by a credit card company, can it then be included in a bankruptcy?

  153. Jennifer, I’m not an attorney so I can’t provide you with legal advice. However,
    my understanding is that the community property status of LA would only become
    an issue if you did file bankruptcy, or if there were litigation by one of the
    creditors. In terms of your credit report, any cross-reporting of his accounts
    onto your credit file would be due to your having status as an authorized user
    on his accounts. I suggest you run your credit report separately, in order to
    determine which accounts of his show on your report. If his accounts show, then
    you should be able to dispute this reporting with the three major bureaus. Beyond
    that, you two need to get on the same page with regard to this problem!

  154. I live in Louisiana, a community property state. My ex has $18,000 in debt that he has not been paying on, possibly since we filed for divorce in April this year. The creditors are calling looking for him, but they will not discuss the accounts with me. He refuses to take any action, either calling his creditors to work something out or signing up with a DMP. I have even tried getting onto a DMP to work something out with his creditors, but I can’t because my name isn’t on the accounts! It seems my only option is to file bankruptcy, which I absolutely don’t want to do because my credit is actually pretty good now and I want to buy a house within the next year or two. I am terrified that by the time his creditors are ready to talk to me (i.e., demand that I pay the debts) the interest and over-limit and late fees will have put the debt really over the top, and then I will have to file bankruptcy anyway. They can’t garnish his wages because he is a bartender and works for tips.

    Also, can these debts show up on my credit report and affect my credit score? If so, this doesn’t seem fair, since they won’t deal with me now.

  155. Steven, you’re most likely beyond the Statute of Limitations for a contractual
    matter under your state’s rules. However, I cannot say for certain whether an
    e-filed tax refund would be at risk, because I don’t know the terms of the original
    agreement you signed with H&R. At a minimum, I certainly would not e-file through
    H&R block! Regarding your credit report, negatives are supposed to come off after
    seven years. What you should do is write to the three major credit bureaus and
    dispute the negative item.

  156. Charles, In 2001 i filed a refund through H&R Block. I didnt know anything about taxes at the time, and i didn’t know that i couldn’t file my then girlfriend, now wife’s children on EIC even though i supported them all year. H&R block did this and I have had a $3000 debt to one of thier lending banks (Houshold Taxmasters). I was sold insurance that if they made a mistake i wouldnt be liable, but i make the mistake of sending the origional copy of the papers to them. (yes i know, very dumb). I am still fighting with them and have made no payments. It it charged off on my credit. It has been almost 8 years now. What can i to remove this from my credit and do i have to worry about then taking my Tax return if i E file this year? Anything will help.. Thank you.

  157. Kenneth, keep disputing it. If you didn’t create the debt, then it shouldn’t be
    on your credit report. Try the credit repair materials at http://www.n2credit.com.

  158. I have two negative items reporting my ex report but the other two they came off of two collection agency trying to collect for the same thing but for one them every month the amount changes and the other stays the same I requested validation from both but one reponded it’s for a fitness club but I don’t remember signing up for I disputed with the credit bureau but both keep come back verified by the way on my report it shows it happpened back in “04” in michigan what can I do about that.

  159. Shyla, the SOL for written contracts in Louisiana is 10 years. However,
    since the contract was originated in TX, then I don’t see how they could
    apply the LA SOL period. Check the contract itself (since they sent you a copy)
    and see what it says about the contract being governed by state law. I’m betting
    it says that the laws of Texas apply, since that’s where the school was located.
    I don’t make specific recommendations on credit monitoring, but my advice would
    be to purchase a service directly from one of the three major credit bureaus.

  160. Thanks, Charles. The loan was through the school only. I have already paid back the loan received from AFSA. Does the SOL apply to the state in which the contract was written in, or the state one currently lives in? I live in Louisiana (LA – – I should have made that clearer). Also, is there a certain credit monitoring system you would recommend using? Thanks so much!

  161. Shyla, assuming that this was truly a private finance contract, and not a
    student loan that was part of the Federal student loan system, then the
    Statute of Limitations (SOL) is relevant here. In both Texas and California,
    the SOL for written contracts is four years. You’re way past that now, and
    therefore they cannot win a lawsuit against you over this obligation. They
    are just trying to trick you into thinking they have some power over you
    just because they produced a copy of the original agreement. I suggest you start
    by putting a credit monitoring system in place, in case they try to add a bogus
    derogatory entry onto your file. If they do, dispute it vigorously. Also, you
    should write to them and explain that you are aware of your rights under the
    SOL for California, and that you do not owe this obligation because you never
    actually received the education associated with the supposed finance contract.

  162. Charles, when I was 18 (in 1998) I enrolled in a private computer center school who told me all the things I wanted to hear (get rich quick, etc.)when I didn’t even own a computer. They took my pell grants and my student loan (which I’ve paid off). I ended up having to drop out because of financial stress (I was also required to pay them on a loan to me of a little over $7000.00). After beginning to get my life in order, I contacted the school to find out about my debt and found that the school was no longer in business (in Texas). The debt I owed that school has since been charged off and is no longer on my credit report. Now I’m getting calls from a collection agency wanting payment. I sent the validation letter like you said to do in some other posts and they’ve sent me back a copy of my original paperwork verifying the loan from the school (which I never saw a penny of). They are now stating they’re no longer treating it as a disputed account and are going to pursue collection. My question: what are my options? I’ve finally gotten my credit good (messed up by enrolling in that school and then a nasty divorce) and I don’t want anything negative on it again. I’m not denying the loan, but I also don’t feel that I should have to pay it because of how they obtained my signature, etc. Also, it says I needed a co-signer b/c of my age, but I don’t see one listed. Do I need to pay the loan or would that hurt my credit again? I currently live in LA, but the loan was for a school in TX (from 1999). I’d appreciate all the advice you can give!

  163. Teresa, the SOL for South Carolina is 3 years. The SOL period is usually
    defined as from the date of last payment or last transaction activity
    on the account. If you made a payment 3 months ago, that might have re-started
    the 3-year clock. In some states, however, it takes a regular series of payments to
    re-start the SOL clock. You’d need to check with a local SC attorney to get
    confirmation on whether it requires a series of payments in your state,
    or if a single payment will re-start the SOL period for SC.

  164. Does the SOL mean? If the charge off occurred 3 years ago but I paid on it
    3 months ago, does it start over from the last time the charge was paid on.
    If I want to ignore it for now and wait it out for SC SOL? What is SC SOL?

  165. John, your wife’s credit would be negatively impacted by default and/or charge-off
    on the accounts on which she is a joint holder. But honestly, if you’ve
    reached the point as a household where you can’t sustain payments on the $70k
    of debt, what’s the point in worrying about either of your credit scores? You
    literally cannot afford the credit you already have!

  166. i have approx. $70,000 cc debt(1 or 2 credit cards are joint acct). a house under wife’s name and a business my wife. after few late payments interest rate are so high. i don’t see any hope for paying it back. will charge off effect my wife’s credit report?

  167. Steve, there is no requirement for the agency/attorney to respond to a
    verification request within a certain time limit. Rather, the requirement
    is to suspend further collection activity until such verification is obtained
    from the creditor and mailed to you.

  168. Another quick question from Steve. I requested verification of debt from Atty’s office within the 30 day period.(9/18) for a letter I got on 8/20.. I haven”t heard another word. Do they have a time limit to respond to my request?

  169. Annie, sorry to hear that a bottom-feeding collection outfit is harassing your
    mother like this. The very first thing you should do is request validation of the two
    accounts. My guess is that the debts have long-since been sold to debt purchasers, who
    often have trouble proving their claims. The request has to be in writing, and it should
    be sent via certified mail with return receipt required. That will slow down the collection
    activity. Also, SS benefits cannot be garnished, so no one is going to take away her
    income. It may or may not be a good idea to settle these two accounts. It depends on the
    exact situation — whether the accounts have been sold, the Statute of Limitations
    for her state of residence, and so on. Feel free to email me at info@zipdebt.com
    and we can further discuss it off-blog.

  170. Tom, the consequence of suspending minimum payments on the $80k debt is that the
    accounts will enter the collection process, which is a three-phase process starting
    with the initial 6-month period leading up to charge-off, followed by collection agencies,
    collection attorneys (possibly), and debt purchasers. The worst-case scenario is lawsuits
    by one or more creditors. If a creditor obtains a judgment against you, then yes, they
    can place a lien on your real estate. Yes, you can negotiate with the banks — that’s
    what my entire website is all about!!! What I suggest is that you read my 32-page
    report and as much as possible of the free content on my site and blog. If it sounds
    like debt settlement is a fit for your situation, then you should consider one of
    my training & coaching packages.

  171. I sm writing for my 72 year old mom who has been contacted by a collections attorney for her 6,000 credit card debt which was charged off in 2005. I have written several letters explaining that she cannot pay this account as well as another account charged off in 2006 totaling 4,000. She was employed until 2005 when she had a stroke. She only receives social security benefits, and only has a life time right to the home that she lives. She has no other financial resources or assets to bail her out of this situation. The threat of being sued is very frightening for her. What can I do to help? We have two kids in college and cannot afford to pay out 11,000 to rid her of the debt.

    Thanks for your assistance…..Annie

  172. I have roughly $80,000 in cc debt and at this point I cannot handle it any more. I want to stop paying them. What are the ramifications ? I have three homes that are in my name but are pretty much financed to the hilt. Can the credit card companies go after my real estate ? Can I stop paying and try to negotiate down the total amount ? What can they do ? what do they typically do ?
    Thank you

  173. Greg, a debt charge-off from 1999 would be well beyond the legal Statute of
    Limitations (SOL) for most states. If in fact the debt is beyond the SOL
    period for your state of residence, there is no point in negotiating a settlement.
    The reason is because the settlement will add a fresh negative entry to your credit
    file and it will be like buying a 7-year credit ding. Email me at info@zipdebt.com,
    tell me what state you live in, and then I’ll reply off-blog to you. Also let me know
    whether it was originally a credit card debt, or some other type of debt obligation.

  174. I received a letter in the mail from a collection agency today for a debt that was charged off in 1999. They are giving me 3 payment options or threatenting lawsuit. My question is: Can I negotiate with them to settle for a lower amount than they are offering or must I choose from one of their 3 options? If there is a chance that debt collectors will negotiate, should this be done via telephone or in writing. I would like this to go away as fast as possible but I do not have the funds to pay off what they are asking.
    Thank you for your time.

  175. Steve, if you are going to request verification within the 30-day dispute period,
    then you should wait for a mailed response before you initiate any type of negotiations
    with the law firm. The reason is because technically the verification request is a
    form of dispute, where you demand that they provide supporting documentation for their
    claim. Often, debt purchasers cannot do so, and as a result, you can sometimes get a
    better outcome this way than if you immediately jump into negotiations. Now, there’s a
    lot more to it than this, and I can’t possibly coach you through the whole process
    via a blog comment, so I suggest you consider purchasing one of my training/coaching
    packages in order to learn how to do this properly.

  176. I have a charged off credit card from 3 years ago, and have now heard from an attorney’s office representing a collection agency that bought the old loan. They say I owe 21 thousand, about 6 thousand interest and fee’s.
    Do I call the lawyer and try and work out a payment plan? I will write them within 30 to verify the debt.
    Please help.

  177. Emma: Debt collectors threaten legal action on just about every collection call made. So yes, it’s just a ploy designed to rattle you and intimidate you into asking for a loan from a family member. The only time you should take such threats seriously is when the account is being handled by a collection attorney licensed in Utah, where you live. Otherwise, it’s just hot air. Yes, the worse that can happen is a civil lawsuit, but you can forestall that in many cases by requiring the collector to “validate” the claim. This is often difficult for debt purchasers to do, since they don’t usually obtain the original documents (credit card agreement, etc.) from the creditor at the time they purchase the account. It usually has the effect of stalling the collection activity, and this tactic can buy you the time you need to raise funds to settle these accounts. You should still think in terms of settling them eventually, when you are in a better financial position, because the SOL for credit card debt is 4 years in UT, and that’s a long time to wait out the collection process.

  178. I have about 5 credit cards that were recently charged off. I have been in a very difficult financial situation for the past year, and unfortunately I don’t see it improving. I cannot pay even a low monthly amount as a settlement. Between the 5 cards, I have about $5,000 in debt (the highest debt on one card is $1,700). I live in Utah, but many of the debts were incurred in Illinois.

    I’m now getting a lot of calls from creditors, and even law offices saying that they purchased the debt from one of the credit card companies, and that I need to pay now, or “legal action will be taken”. When I ask what exactly they mean by “legal action”, they pretty much say that they can’t discuss details. “Ask a friend or family member” was what they told me! Is this just a ploy to get me to pay, or am I really in trouble?

    Should I ignore the calls and wait for the statute of limitations to run out (I realize it’s quite a while)? What happens if they file a lawsuit against me and I still don’t pay? Can my wages be garnered?

    What’s the worst that could happen in my situation? What’s the most likely thing to happen?


  179. Melody, the key here is whether the fresh entry shows “date opened” as 8/08.
    That would be illegal. It’s not illegal for a debt purchaser to place their
    own entry on your credit file, but they can’t “re-age” the debt. If this is
    what’s happened, then you should dispute the entry with the three major
    credit bureaus.

  180. My husband and I had a vehicle repossessed in 10/04. The original creditor shows
    the debt as a charge off. Another company purchased the note and this month it
    appeared on both our credit reports as a delinquent loan active 8/08. How can I
    address this new item with the credit bureaus? What is the appropriate action?
    do they have to remove the item? correct the date? or should I simply dispute it?


  181. Megan, you need to consult with a real estate attorney. I specialize in credit card debt,
    not mortgage debt. I’m not sure from your description exactly what it happening. Usually,
    a lender does the charge-off when they declare a loss officially. This has nothing to do
    with title to the property, which I would expect them to take back. Charge-offs remain
    on a credit file for 7 years. Technically, a mortage lender can sue for failure to pay
    the mortgage, but usually once they foreclose they don’t pursue it after that. Get some
    legal help specific to your state, so you know exactly what is happening and what your
    rights are in this situation.

  182. My home was under foreclosure and up for sheriff sale Aug.6, 2008. On Aug 4th they cancelled the sale to review for possiable charge off. What does this mean? If they charge off the house do I get the deed to it and keep it? Will they just turn around and sue me for the money? How long does a charge off stay on your credit if you never pay it? My family has already moved from the property and I am so confused on what is going on.

  183. Mary, automobile insurance is outside my area of specialty, sorry.
    You need to talk to a consumer attorney in your state to find out exactly
    what your rights are in a situation like this.

  184. hi i recently lost my vehicle to vandalism it was totalled but my gap insurance said they r not responsible for 7000 of it because sometime durin the loan i did skip a payment. so what do i do with the remaining balance should i contact bank i dont feel like i should be responsible thats why i have insurance and gap right?

  185. Rachel, I’ve never heard a SOL clause phrased with that language. The
    “written contract” part distinguishes a contract for a specific number
    of payments (such as an auto loan) from an open agreement like a credit
    card, so the 6 years sounds correct. However, the SOL is usually measured
    from the date of last payment activity on the account. If the AZ Statute is
    worded with the language you indicated, then the most likely interpretation
    is that it starts from the date the account was declared in default by the
    lender, which then leaves them free to file suit for breach of contract.

  186. Thank you so much for the quick response… I just have one more quick question that needs a little clarity… What does it mean “Written contract 6 years: from the date creditor could of sued.

  187. Rachel, the SOL can be a tricky thing. I’m not an attorney myself, and I’m
    also not in AZ so I’m not 100% certain of the rules for your state. However,
    in most states, it requires more than a single payment to “reset the clock”
    on the SOL period. Here in CA, for example, it takes a series of payments.
    So I suspect the agency is just bluffing. It’s probably a debt purchaser
    that bought the account for pennies on the dollar and is trying to collect
    from you. Technically, yes, they can sue you. However, it’s much more likely
    they will try to bluff you into a series of fresh payments, which WILL reset
    the clock, leaving them free to pressure you even further. If you have
    received a collection notice from them, then I recommend you send them
    a debt validation letter, requesting that they provide documented proof
    of their claim. Be sure to send it via certified mail with return receipt.
    Chances are, once they receive that they will quit bugging you. Also, I
    recommend you keep an eye on your credit reports, since agencies like
    this sometimes try to place a fresh derogatory entry on there pretending
    it’s new. This is not legal, but they try to do it anyway.

  188. My husband is currently getting calls from a collection agency an old car loan. It is no longer on his credit
    report. The collector sent us mail saying he last made a payment on it in 04, he did make a payment but it was
    because he was in the military at the time and they made him do it. What i want to know is can they sue us over
    this issue. We live in AZ and when i look up the SOL it 6 years for written: runs from the date creditor could
    have sued. What does that mean? This was all done before we were married. I have always had decent credit my
    score is in the upper 700’s and his is in the low 700’s with my help. we want to buy a home soon if we can and
    want to know how this will affect us. Thanks for your help.

  189. Kat, the charge-off deadline is only relevant when you actually have
    money to settle with. The reason is because you can often get a deeper
    discount before that deadline, since most creditors have not yet involved
    a third-party collection agency before that point. In terms of impact to
    credit, there’s not much difference between settling before versus after the
    charge-off point. Both are negative on your credit. The real issue here is
    that you simply don’t have money to settle with. Obviously, you can’t settle
    without funds to do so. Most settlements that take place after charge-off are
    in the range of 50%, and typically must be paid in a single lump-sum, or maybe
    over 2-3 months max. Longer-term payments on settlements are usually not
    possible, because such arrangements lead right back to payment against
    the full balance. As to options, I don’t know enough about your situation
    to be sure, but you can’t just ignore this problem, and the DMP approach
    is obviously not working for you. I recommend you have a consultation
    with a bankruptcy attorney to determine whether or not you qualify for
    Chapter 7.

  190. I’ve got about $30,000 in CC debt, and while I was out of work I was not able to make any payments on them at all. Now the interest rates are sky high and the fees are ridiculous. At least two of the creditors are now threatening me with charge-off. I contacted a DMP and they have only been able to get 2 of my 4 creditors to agree to a repayment plan so far. Bottom line is, making even the minimum payment through the DMP is killing me financially and I just cannot afford it. It is nearly $900 a month for the DMP pymt, all the while my creditors who have not agreed to the plan are still charging 30% interest even though the DMP is sending them paymt every month. At this point I do not even care about my credit report because I can barely afford to live from day to day. Do I have any options? Could I just let it charge-off and then settle for about 50% of amt owed? Or could I even settle without incurring the charge-off? And if I DO settle, will I be allowed to make payments or will it all have to come in one lump sum? I never want to SEE another credit card for as long as I live!!!

  191. Jerry, this sounds like a debt purchaser coming at you via
    lawsuit. Call your local county courthouse and see if a lawsuit
    has been filed in your name/SSN. If not, they are gaming you,
    pretending it’s a legal matter when it’s not. Also, the Statute
    of Limitations in TX is 4 years. If it’s been longer, it doesn’t
    mean they cannot sue you. You still have to answer the lawsuit and
    defend yourself by asserting that the debt is time-barred under the

  192. Charles,

    I’m in default for around 4 years now and in Texas. (No excuses but a divorce/worldcom job didn’t help the matter. a couple late payment and an interest rate jump to %33. Had to just make payments for my day to day)

    I have had a few calls telling me they are going to sue me and even had a guy show up to my house. I told him I didn’t care why he was here but for him to leave. He claimed he had legal document for me but he left and now I have a guy stopping by and putting stickers on my door. The stickers are stating that there is something for me to claim. 1st, 2nd, and 3rd attempt. How do I know if I’m being sued? My nerves drive me crazy think someone is going to bother me at home.

    I do appreciate the insight…I wish I had made better decesions when I was younger with my credit.

  193. Evelyn, sorry to hear of your dilemma. The first thing you need to
    figure out is whether or not the vehicle was repossessed by the lender,
    or your ex still has the car and is hiding it from repo. Assuming
    they have repo’d the car, then you will be left with a deficiency
    after they auction it, and that becomes an unsecured debt like any
    other, and it can be negotiated via a settlement. What I suggest is
    that you start by writing to the finance company, via certified mail,
    and in the letter describe what happened and ask about the status of
    the car (whether or not it has been repo’d). If they have repo’d the
    car, then your ex is pretty much out of the picture at this stage
    and you will be dealing with the debt balance via collection agencies.
    I also suggest that you meet with legal aid services at your base and
    get some advice on any options available to you as active-duty
    military, etc.

  194. I have a charge-off on a vehicle, purchased in CA, that me (resident of TX) and my ex purchased, though its only under my name. I serve in the military and I got deployed right after the deal was made. I left him my checks to send the payments and some money in the account. While overseas, I learned that he spent my money, and didnt make payments of the vehicle; I recently came back, and found out it was charged off, he changed his address; I have no way to locate him. I called the finacial agency, they only tell me that the account was closed and nothing further; I have also tried to contact the dealer, but they keep hanging up on me. I can fly to CA because am getting a new duty station and my leave time is not until next year. I have no documentation of the vehicle because I left it in CA with him. I still live in TX. I have no clue of what should I do. Your help will be greatly appreciated.

  195. Sharon, we’re talking about a 5-year old account that should drop off your
    credit report in 2 more years. Settling it at this late date will only buy you
    another 7 years of negative credit. However, if you are getting fresh collection
    activity on the account, that’s a different story, and then the answer would
    depend on the Statute of Limitations period for written contracts in your state.
    In other words, if you are being threatened by collectors, and are still within
    the SOL period, then there is risk of litigation by a debt purchaser. If all is
    quiet, then I would simply wait out the SOL period and let it drop off your report.

  196. I have a charge off on a vehicle that is back from 2003, It was
    purchased brand new(with no gap insurance) Had I known there was such a insurance I would have took it. I made payments on time for two and half years @716.00 monthly, the vehicle was totaled and my insurance paid market value, what they show is all interest.
    At this point should I settle this or just let it run its coarse?
    Thanks for your time.

  197. Denise, in most states it is not illegal for a creditor to file a lawsuit after the
    SOL period has expired. Most consumers on the receiving end of such a lawsuit promptly
    stick their head in the sand and ignore the problem hoping it will go away. But the
    creditor will then get a default judgment, at which point the SOL goes out the window
    and the judgment takes precedence. Judgments can be vacated, but it’s much easier to
    prevent the judgment in the first place. If a person gets sued on an expired debt,
    they still need to defend themselves and formally respond by asserting that the debt
    is time-barred under the SOL for their state. The bottom line is that the consumer
    has rights in this situation, but it’s still necessary for the consumer to learn
    about those rights and to exercise them. The most effective method of preventing such
    a lawsuit in the first place is for the debtor to send a validation letter to the
    debt purchaser. It’s very unlikely that a purchaser will be able to properly document
    their claim on an old expired account. And this will greatly decrease the odds that
    the purchaser will pursue legal action, once they realize the debtor knows their
    right to demand proof.

  198. How can Junk Debt Buying companies file any claim on old Credit Card debts when the SOL has ran out? I mean just because they buy the old debt, how do they have any rights to collect on it when the SOL has ran out? What are our rights on this issue? I see this happening alot more lately with more people being harrassed by these types of companies. How are they able to do this?

  199. Responding to Dawn from a question/comment on 7/11: I suggest you focus first
    on resolving any judgment debts, simply because you risk follow-up collection
    activity of a much more serious nature on an account that’s gone to judgment, versus
    one that has not. There is an entire sub-industry of judgment recovery that specializes
    in aggressive collection on this type of debt. What you should do is determine
    which accounts are in judgment status, then build up your resources until you have
    funds to negotiate with. When you have approximately 50% for an account, then get
    in touch with the attorney firm that filed suit and see if they will do a settlement
    with you. Usually, on really fresh judgments, it’s not possible to get a good deal,
    but when a judgment is 2-3 years old, you can often get 50%.

  200. Charlotte, the first point you should understand is that the SOL has nothing to do with the 7-year reporting period for negative items on your credit report. These are two different things entirely. Yes, the SOL is 3 years for SC, and the SOL in GA for medical debt (based on it being a written contract for services) would be 6 years. The SOL is the period in which the creditor can win a lawsuit against you. Expiration of the SOL does not relieve you of the obligation itself, or remove it from your credit file. However, for all practical purposes, there is no point at all in paying or settling an account beyond the SOL period, *unless* you get a credit deletion as part of the deal. Otherwise, you’re just buying another 7 year negative item on your credit report.

    So to your question, no, if you pay these debts, it will not remove them from your credit report. It will show as a “paid collection account” or words to that effect, unless you get the creditor/collector to agree to a deletion. And that is usually only possible on debts beyond the SOL period. Also, it’s not necessarily true that a debt will appear only once. If the original creditor placed a charge-off on your file, and then sold the debt to a purchaser, the purchaser may also place their own entry on the file, provided it does not show as a brand-new account with a recent “date opened.”

    The bottom line is that settlements or full payoffs will really not do much to improve your credit score at this stage. However, these unresolved obligations are also negatively affecting your debt-to-income ratio, so if you plan a home purchase within the next 1-2 years, it may be wise to go ahead and settle these accounts now so they don’t become a roadblock later. If you don’t plan any major purchases in the next few years, and if no one is attacking you on these accounts through the legal process, then it probably makes more sense to let things stand as they are for the time being.

  201. Wow, I was glad to see that you’re still answering comments here. I’ve been searching but couldn’t find the answers I needed, except for here.

    We went through a bad patch and have some old debt and I’m wondering the best way to deal with it. I have three accounts on my credit report listed in collections, but not listed in negative accounts. Two are from SC and the delinquency date is 2005, am I right that the SOL runs out this year? The other is a medical debt from GA from 2004 but I couldn’t understand the GA laws. Since they are in the collections section, does that mean if I pay them, they’ll leave my credit report?

    Also, in negative accounts (I know, we’ve gotten back on track but my credit is just awful), there are two collection agencies listed. I read that each debt should only appear once, so can I have those removed, leaving just the original debt holder? And if the SOL has run out, is there any point to paying the new debt holder (other than moral obligation)? It doesn’t seem like it’ll help my credit now.

  202. In reply to Jessica, what you should do is request verification of the debt
    from the law firm that is threatening you. Also, you state that the IRS issued
    you a 1099-C for the canceled debt. However, it’s usually the creditor that issues
    the 1099-C, not the IRS. The 1099-C is a form that is sent by the creditor to the
    IRS to notify them of the cancellation. Generally, once the debt is forgiven,
    that usually stops further collection effort. So you might also consider getting
    in touch with the original creditor to correct the mistake.

  203. I received a form 1099-C from the IRS for this tax year (2007) for a debt that it says was canceled on 7-22-2004. I have already paid the appropriate taxes for the amount canceled. Four days ago, I received a letter from an attorney’s office stating that the original creditor for the debt is going to sue me in court for the full amount of the debt. Is this legal? What should I do?

  204. I have credit card debt that is in judgement and charge off, I don’t have the
    money to pay off these debts but I want to clear up my credit. The collectors
    have not attempted to contact me in a while, my debt is about 2-3 years old.
    Any suggestions on how to handle my situation.

  205. Mary, an auto loan is indeed a written contract, so the Statute of Limitations
    period for written contracts would usually apply to an auto loan. I’m not sure
    what you mean by “receivables.”

  206. Is an old charged off auto loan considered written contracts and receivables?

  207. Kay, there appears to be a typo in your comment post. You say you *can* do
    62% settlements, yet *cannot* afford a 55% settlement? Anyway, I recommend
    that you do settle it before charge-off, and NOT let it go to escalated status
    after charge-off. If it goes to a collection attorney in your state, you’re looking
    at a much higher percentage than what you already have on the table. As far as
    tips are concerned, sorry, but I don’t know enough about your situation to comment
    further on tactics. I recommend you consider purchasing one of my program packages
    to get the training and coaching needed to take the guesswork out of what you’re
    trying to accomplish.

  208. I have a large amount of CC debt for a business that I have closed. I have 7 cards in total, one card (Citi) has called with an offer to settle at 55%. I am in a position to settle all of these debts at avbout 62%, I don’t have the funds to do 55%. My question is should I allow it to go into a charge off and risk being sued in the state of Arizona and settle for lower then, or do you have a negotiating tip I can offer them before it goes into Charge Off, and one that I can use with others.
    Thanks for your time

  209. Ricky, if you believe that sales pitch, then I have a nice bridge for sale you
    may also be interested in! Scroll through the archived posts on this blog, and
    read all the articles pertaining to (a) the debt elimination scam, and
    b) false claims made by some shady settlement companies. You’ve obviously
    been talking to one or the other. Remember the old saying, “If it sounds too
    good to be true…”

  210. I have 50,000 in cc debt i have a company telling me i can stop paying now if i join there club and there atterny will take care of it and in 1 year 700 credit score

  211. Jeff, my understanding is that it’s based on whatever state you get sued in.
    If they sue you in Ohio, it won’t do them much good, since a judgment from
    one state doesn’t necessarily give them a way to collect against you in a different
    state. So for practical purposes, they would need to base collection activity
    on the SOL period for TX (4 years).

  212. Ok, I have debt that originated in ohio, I used to reside there, but have since moved to TX. Which stated will I fall under ofr Statue of Limitations? Can anyone help or guide me in the right direction?

  213. Helen, I’m not an attorney so I can’t advise you on whether your case has
    merits and would be worth pursuing. But I recommend against representing
    yourself in court in this situation. Following your answer to the lawsuit,
    there will probably be any number of motions by the other side, demand
    for interogatories, etc., and it would make sense to ensure that these are all
    properly handled. I recommend you get in touch with a NACA attorney in your neck of
    the woods. The website is https://www.naca.net.

  214. I am being sued by Citibank for a business charge card balance of around $5000
    that they wrote off in 2005. I have a 1099-C cancellation of debt form, but no
    settlement letter. This debt originated in IL, but I moved to TX in the fall of
    2005. According to the terms of the charge card, I am personally liable.
    I think I made my last payment in January 2005.
    Based on prior posts, it sounds like I legally do not owe this debt anymore.
    Is it that simple and I can represent myself – or do I need to hire a lawyer
    to ensure I properly answer the discover questions?
    I already filed the Original Answer due 20 days after being served. It states
    I can be granted my costs. Is this just typical jargon, or is it worth my effort
    to hire an atty to counter-sue for frivolity and costs?

  215. In reply to “Wondering,” what you were told is 100% not true. This outfit is apparently
    violating the FDCPA law with every phone call. There is a 4-year SOL in Texas, so you’re miles
    beyond that. Here’s what I suggest. Get their contact information (don’t assume it’s the same
    that you might hunt up on various Internet websites that monitor collection companies — these
    outfits move around a lot, etc.). Then go to the website for your Attorney General and file
    a complaint about this company. The more complaints that consumers file about illegal collection
    tactics, the faster the AG or the FTC will go after these con artists.

  216. I was also called by the national service of process for a discover card debt. He said the debt is from 1996 and that 1999 was the last time i paid on it. I am in texas. He says I can settle $3269 for 1500 but must do so in the next 72 hours or I will be served. Is this true? Is there an sol? He said he has documentation but wouldn’t send it because he said it must be done in 72 hours

  217. Dolph, this is just a junk-debt buyer trying to trick you into making a payment. Don’t fall
    for it. In most states, the legal Statute of Limitations on credit card debt is 4-6 years, and no
    state has a SOL period longer than 15 years. So it’s all bogus nonsense. They can’t win a lawsuit
    against you since the debt is time-barred based on the Statute of Limitations. Technically, they
    can file a lawsuit, but all you would have to do is defend it by asserting that the debt is
    time-barred under the SOL. Further, there will be no way for them to produce original documents
    proving you owe this debt anyway. To your follow-up question, no, it’s not legal to refuse written
    notification of the claim. A written collection notice is required under the FDCPA. If you have
    contact information for this outfit, file a complaint online with the Attorney General for your
    state and the state where company is located. I suspect, however, that they gave you a bogus name.
    If you can’t pin down their location, just hang up if they continue to call. Eventually, they’ll
    leave you alone when they realize you’re not going to fall for their tricks.

  218. Further my inquiry. I also requested from the agent a written documentation of NSP’s intent to collect on this debt. I was told that the only form of communication is by phone. Is this legal?

  219. I received a call from a firm named National Service Of Process in attempts to collect on a Discover card debt of 8,000 (6K of which was accumulated interest throughout the years). Due to personal reasons I stopped making payments on the Discover card in 1992. I have been unemployed since. An NSP rep told me that if I do not pay back the amount owed then this will escalate to me being sued with a formal hearing in court. Is he correct?

  220. Camille, your next course of action is to wait for a response to your validation letter.
    If there are no original account documents included in the reply (such as a copy of the
    original signed credit application or agreement, etc.), then dispute the response again
    with the NAF. Since the whole arbitration process is rigged from start to finish, the outcome
    99% of the time is an award for the creditor. However, they still need to forward to a local
    attorney to get it converted into a legal judgment that can be enforced. If things get that
    far, I suggest you get help from a NACA attorney (www.naca.net).

  221. Question….I have a charged-off
    debt bought by CACH,LLC with
    lawyer Scott Lowery as their
    front man. First the debt shows
    up on the credit report as a
    charge-off from the original
    creditor and also shows up as a
    debt in collections as of this year
    with Scott Lowery. Is this legal?
    The SOL is 4 years – which will be
    Sept. ’09. It went to the Nat’l
    Arbitration Forum under CACH. It
    shows that CACH was the party at
    interest and that they had the
    right under arbitration contract
    (of which I never signed – in
    fact – I have never signed any-
    thing with the original creditor
    it was applied for over the
    the original creditor to pursue
    arbitration. I requested the debt
    to be validated by CACH…they in
    turn submitted a “motion to stay”
    shortly after I requested the
    DVL and gave them 30 days to do
    so – the “motion to stay” was
    filed with the NAF-
    what would be the next course of
    action for me? I did submit a
    cease and desist letter with
    the DVL….

  222. Eric, if the 1099-C was issued for the full amount of the repo deficiency,
    then there was technically no debt for the purchaser to collect. Further,
    if you were “insolvent” at the time of the settlement, you can file Form 982
    and claim an exemption on the taxes. (See IRS Pub. 908 for details.) Regarding
    the lawsuit, get some legal help. Look for a NACA attorney in your area, via
    their website, http://www.naca.net. They may be able to get the judgment overturned
    due to procedural violations, etc.

  223. I have a reposession on a vehicle in 2002. I just found out a collection agency purchased the debt, and sued me in 2004 and won there case. Which is obvious since they never properly served me, infact I never even knew about this until last week. The way I found out about all this is they are now going to be garnishing my wages. I recieved a letter yesterday from the I.R.S. that I now owe back taxes from 2006. The original lender filled a 1099 debt cancellation and forgivness for the 2006 tax year. I now have back penalties and intrest with the I.R.S. on the amount of the loan because it is considered income for me. But now I still have to pay off this debt? To the collection agency for double the amount I originally defaulted on? Plus pay the I.R.S. for back taxes on the same loan?

  224. Christina, the only way to speed up this process is to dispute
    the negative items directly with the three major bureaus. They are
    required to investigate the items and delete them if they can’t be
    verified. Since the collection agencies have not responded to your
    validation requests, they may not respond to the bureau inquiries
    either. This dispute process is really all that credit repair
    companies do. If this doesn’t work though, then obtain a
    notarized letter from your brother indicating that this debt is
    his responsibility, not yours, and use that letter proactively
    with lenders or loan officers when you seek financing.

  225. I co-signed for my brother and he got the car repo’d. I’ve been through this before when another collection agency tried to collect on the car. I did not even know it had been repo’d until 2 months after the fact because the original company never once contacted me for payment or I would have caught the payments up. Needless to say. The original creditor just re-reported to my credit and so did a collection agency. I wrote to this collection agency and asked them to validate the debt but they didn’t. I need this removed from my credit so we can refi our house and get a new car. Any suggestions on how to speed up this process? P.S. What’s so frustrating is that NO ONE has ever reported to my brothers credit for any of this.

  226. Felicia, I would definitely expect the charge-off of the 2nd mortgage to show on your credit report.
    Whether or not you could include it in a bankruptcy depends on the type of bankruptcy filed and other
    factors pertaining to the property. Ditto for the effect on the second lien. You should seek assistance
    from an attorney qualified to handle real estate matters and/or bankruptcy.

  227. I live in CA and I have been informed that my 2nd mortgage is being charged off and assigned to a 3rd party collection agency instead of them foreclosing. Will this show as a charge off on my credit and could this be included in a BK? If so, what happens to the 2nd lien on the house?

  228. Aida, this sounds like a classic debt purchasing situation. If you live in CA where the SOL is
    4 years, and this debt was last paid in 1999 then they cannot win a lawsuit against you as long
    as you defend it correctly on the basis that the debt is now “time-barred” under the SOL. However,
    they probably have no intention of litigating and are instead simply trying to trick you into making
    a payment or series of payments are re-starting the clock on the SOL. Don’t fall for this. Nor should
    it be appearing on your husband’s credit report since 7 years have elapsed. If the purchaser has placed
    a fresh entry on his report, you can dispute this directly with the three major bureaus. Meanwhile, if
    this agency is claiming that they cannot mail you a collection notice, this is a direct violation of
    the FDCPA. File a complaint online with the CA Attorney General and provide as much detail about the
    agency as you have (name, address, phone #, etc.).

  229. Mika, whether or not you qualify for the insolvency exemption has nothing to do with
    the debts being secured or unsecured. If the creditors canceled a portion of the debt and
    issued you a 1099-C, then the only issue is whether you were insolvent at the time the debts
    were cancelled. There is a line on Form 982 Part I where you check the box to claim insolvency. Before
    you do this though, you need to determine whether or not you actually were insolvent. This is a
    straightforward net-worth calculation. Take the fair market value of your assets and subtract the
    total value of your liabilities (debts). If you are “upside down” then you are insolvent and can
    claim an exemption up to the amount by which you’re insolvent. Get help from a professional
    CPA or tax preparer if you are unclear on the above terms/explanation.

  230. there are a few more things…This debt collector also stated they couldnt send us nothing via usps only by email because they had 72hrs to turn in there finds can they state that? and are they able to put a lien on anything?

  231. My husband has a charge off as bad debt-profit and loss writeoff on his credit report from 9/1999 we started getting calls from collection agency wwrecoveries and associates that they need to collect or send in the information they collected and take us to court. We are in the state of california and the sol is 4 years…So what does it mean can they still force us to pay 10 times more then what was owed….we have no way to prove that he did pay he was overseas in the marine corp. Also should it still appear on his credit report and onces its gone do we still have to pay

  232. In April 2008 I get a CP2000 from the IRS saying
    2 collection agencies charged off debt in 2006
    that I must now pay income tax on. These were
    unsecured debt and the SOL in my state is 7 yrs.
    One of the debts I settled in court on; the other
    is one I don’t recognize. In short, both are so
    old they are in my maiden name and I’ve been
    married for 10 yrs. I can neither afford to pay
    the taxes or the debt, and the insolvency form
    doesn’t seem to pertain to my situation since
    both are unsecured debts. What should I do?
    P.S. Thanks for being here. You make good sense.

  233. Tina, you can try calling the original creditor, but if they have assigned the account to an agency
    then the creditor won’t speak with you directly. Also, since you did a bankruptcy, it’s very likely
    that the debt was sold to a purchaser, in which case the original creditor no longer even owns the
    account. Now, since you filed bankruptcy (BK), if the debt was in your name only, then it should have been
    discharged in the BK and the collection attempt is bogus. An exception might be if you live in what’s
    called a “community property” state where both spouses share equally in the debts regardless of who’s name
    is on the account. What I suggest at this stage is that you get in touch with the attorney who handled
    the BK for you and see if they can offer advice on whether the debt should have been fully discharged
    based on the BK filing, or whether your spouse is still formally liable for the account.

  234. I have an account that has been charged off. Can I still contact the original company and try to work with them or will I have to go with the collection agency? I was forced into bankruptcy and now they are coming after my soon to be ex. What do I need to do? Thanks.

  235. In reply to the comment by Larry on 4/23 (which escaped my attention until now,
    sorry), I agree that your tax and child support obligations should take top
    priority. If that leaves you short of funds to pay off the remaining debts,
    then you should first look at debt rollup as a possible option. Aim to pay above
    the minimum payments by $50 extra per month for every $10,000 of unsecured debt.
    If you can achieve this target, then you’ll be able to retire the debt within a
    few years and improve your credit standing in the process. If this simply isn’t
    possible, then you would need to consider more drastic options like debt settlement.

  236. Dawn, the only certain way to avoid lawsuits is to file the bankruptcy.
    However, since you don’t want to go that route because of the job situation,
    then negotiating settlements is your best bet. I’m making the
    assumption here that the unsecured debt accounts are beyond charge-off
    and have been assigned or sold to third-party agencies. If that’s the
    case, then credit counseling won’t work, since that program is based on
    working with the original creditors prior to charge-off. Most credit
    counseling companies will not be able to work with accounts that are in
    third-party collections. However, this is where settlements are almost
    possible, since the agencies get paid when they collect, and most creditors
    are prepared to accept reasonable settlements to recover something against
    the loss recorded at time of charge-off.

  237. I am in a bit of a pickle. I have had a foreclosure, repo, etc. etc. and was contimplating filing bankruptcy. I just got a new job with an insurance company whom gave me a HARD time for the foreclosure (they pulled my credit) I had to get proof of the 1099 that was filed even to get the job. Anyway question is – I think they will look badly at the bankruptcy and I don’t want to loose the job. I am trying to pay back all the collections and was wondering what the best way would be credit counseling place (they consolidate bills) or try to negotiate the balances myself. I am also trying to avoid judgments and wage garnishements. FYI I live in Fl. if that info is needed. Any thoughts?

  238. Amy, a charge-off is just an accounting step where the creditor formally
    records a loss on their books. It doesn’t mean they can’t continue
    trying to collect, including the filing of a lawsuit. So, yes, they
    can get a judgment even though a charge-off was recorded. The judgment
    is for a different amount because they continued to apply interest at the
    contractual rate, as well as attorney fees and court costs. Also, it may
    be that the original creditor sold the account to a debt purchaser, who
    then retained a law firm to go after you. You asked about the SOL in Ohio.
    Your state is unusual in that it does not have a stand-alone SOL category
    for revolving (credit card) debt the way most states do. This leads to
    conflicting interpretations. Some legal experts say it’s only 6 years,
    based on the period for oral contracts. Others say it’s 15 years, based
    on the period for written contracts. Either way, the SOL period doesn’t
    apply anymore once they have a judgment against you. I recommend you seek
    professional legal assistance locally before this turns into a wage
    garnishment situation on you.

  239. There is a charge off on our credit for $18,000 and then there is a judgement for the same company for $11,000. Can a company get a judgement if they have charged it off? And why is the judgement for a different amount? What is the SOL in Ohio?

  240. I am in the process of selling an anuity that will cost me $40,000 to pay of debt-most importantly child support and IRS. Now, I do have other credit card debt, car note, and college loans that need to be paid off; however, i don’t have enough money to pay all of this. What do you suggest i do? Is there a better plan?

    My goal is to be debt free so that i can then invest in me and my baby.

    Larry Resendez

  241. Ken, this will not work. The banks will not honor requests to delete
    derogatory information on your credit file after the fact.

  242. I am currently in a financial bind and can’t afford to make my credit card payments. My plan is to wait until I have the money for each account and to request letters of deletion before sending my payment to each of the pending accounts. In your opinion, do you believe that this would be a viable solution to removing the accounts from my credit report once I have the letters of deletion on hand to send to the three credit bureaus?

  243. Amalia, you certainly have the right as a consumer to dispute items
    appearing on your credit report. You do this directly with the three
    major credit reporting bureaus (Experian, TransUnion, and Equifax).
    Technically, accurate information will remain on the report, but the
    system is pretty loose and often a dispute will get items removed in
    general (this is really all that so-called “credit repair clinics” do).
    I should point out that even though you paid the account, that does
    not mean the original charge-off automatically should disappear on
    your credit report. However, if there is anything inaccurate about the
    way this has been reported, a dispute to the bureaus should (in theory)
    resolve the problem.

  244. My husband have charge off on his credit from alltell, but afni collect this account and we have settle it. On his credit record, it shows AFNI with 0 (zero) balance but Alltell still ‘CO’ (charge off/collection). Is it possible to dispute it since we have paid this account ?

  245. In reply to Eliot, the Statute of Limitations (SOL) in New Jersey is 6 years,
    not 4 years as you indicated. If the debt was charged off in Dec 2003,
    that would normally mean you last paid on it around June 2003, so the SOL
    will not expire until approximately June 2009 in your state. Prior to that,
    you can still be sued on this debt. This has nothing to do with the 7-year
    reporting period on your credit report, which is a completely different
    discussion. As to what to do, if you have not been sued, and there has
    been no recent collection activity, I’d just wait it out until you are past
    the SOL period. There is very little benefit to settling (or paying in full)
    an account this old, which has probably long since been sold off to a
    debt purchaser. If you do, you actually run the risk that it will show
    up on your credit report as a fresh entry, in which case it’s like buying
    another 7 years of credit damage. Of course, if you get aggressive collection
    activity again, direct threat of litigation, etc., then you should negotiate
    a settlement and include in the agreement that it will not be reported
    at this late date to the bureaus.

  246. Nicolle, charge-off doesn’t work the same way with mortgages that it
    does with credit card debt. If the lender is forgiving the balance
    instead of going through foreclosure proceedings, then this is equivalent
    to a “short sale” where the lender lets you sell the property for less than
    what you owe and writes off the remaining balance. This in turn leads to the
    issuance of a 1099-C for the forgiven portion (or it’s supposed to anyway —
    lenders are not always consistent about this). You will not receive the
    1099-C until next January (2009), but you should not see any
    further collection activity after it gets written off. Further, we have a
    new law in effect that provides temporary relief on any taxes associated
    with balances forgiven on short-sale properties. When you get the 1099-C,
    consult a competent tax professional locally to see if you qualify to
    offset the 1099-C under the new rules, so you don’t have to pay taxes on it.

  247. Oh I forgot to mention im in Jersey, and Statue of Limitation is 4 years.

  248. Hi Charles,

    I have a bad credit card debt 10k with Amex, they charged it off in Dec 2003, The creditors have not collected on it either. (I was away for a while) Would my best interest be, just wait 1 more year and it’ll dissapear from my credit report? Or should I try to pay it?


  249. Hello,

    I have a mortgage in Wayne County, MI. The property in 2006 was appraised at 80K, but with the recent decline in property value, the most the home can be sold for is 30K. The property was scheduled for forclosure in January, but the Mortgage company pulled out citing that the forclosure proceedings would cost more than what the house is worth. So, my question is, how long will they take to charge-off the debt? How long after the charge-off is completed does it normally take to receive a 1099? Lastly, once a 1099 is received, can it still be transferred to a Collection Agency for further collection activities?

  250. Tanya, this is a classic case of “zombie debt,” where a debt purchaser
    buys an ancient account and attempts to collect on it. In Nebraska, the
    Statute of Limitations is 4 years on credit card debt and 5 years on
    written contracts, so you’re miles beyond the SOL period. And since these
    items no longer appear on your credit report, the worst thing you could do
    here is settle the accounts or make any payments, as this would risk a fresh
    negative entry being added to your credit file. To put a stop to the
    harassment, send the collection agency a “validation” letter. The language
    is very simple: “I hereby dispute this debt. Please provide documentation
    in full support of your claim, including a copy of the original agreement.”
    Include any account reference numbers they cite in their letter to you.
    Be sure to send the validation letter via Certified Mail with Return
    Receipt required. They will most likely just stop calling. If another
    purchaser pops up later, simply repeat the process. (They often try to
    sell junk debts to one another.) And if they continue harassing you without
    providing verification of the debt, then file a formal complaint with
    your state’s Attorney General, as well as the Federal Trade Commission.

  251. Forgot to add – neither are appearing on my credit reports.

  252. My husband and I have been together for 12 years. Approximately 3 years before that, I was a typical college student who racked up some debt that eventually was charged off, so we’re talking about almost 15 years ago. NOW, the past 3 months or so, I’ve been getting hassled by a previously charged off debt ($800 to Lerner Co) which was turned over to Asset Acceptance and just last week I received a call from one of the other previously charged off debts. Today in the mail I received a letter from that one ($1400 Spiegel) turned over to Merchant’s Credit Guide. We live in NE where the Statute of Limitations is 6 yrs. What are the options here?

  253. Erik, you really should consult with a local attorney on this matter. I
    don’t know for sure whether mortgage lenders are required to issue
    1099-C forms when they write-off a mortgage loss, the way credit card
    banks are required to issue 1099-Cs when they forgive $600 or more of
    debt. A couple of additional points though. IF you get a 1099-C for
    the written-off amount, that means the debt has been canceled. In effect
    it’s the same thing as a 0% settlement, and the 1099-C actually constitutes
    a form of proof that you no longer owe the obligation. Further, there is a
    provision in the existing code (having nothing to do with recent bills
    pertaining to mortgage-relief) that permits taxpayers to exclude 1099-C
    income from taxable income to the extent that they were insolvent at the
    time the debt was canceled. See IRS Publication 908 for further information
    on the insolvency issue.

  254. I sold my house in 2007, working with the bank on a short sale. I had a first and second mortgage, leaving just shy of $100,000 short of the negotiated sale price of the house. The mortgage company has “charged off as bad debt” and has done a “profit and loss write-off” for the remaining amounts owed on the first and second mortgage after the short sale.

    My question is whether or not they will send me a 1099 for both mortgages, and if they do send me a 1099 do I still owe the $100,000 remaining on the mortgages? I do know that a new bill has been passed granting IRS tax relief for these sale short falls, but it is unclear to me if this process is over after a 1099 or if I will be forced to either pay the amounts (which I cannot do) or file bankruptcy.

  255. Tony, I don’t know if TX has any special rules that prevent creditors
    from attempting to collect beyond the SOL period. However, in general,
    there is nothing that says they cannot request payment. What the SOL
    does is prevent them from being able to litigate the claim in court,
    provided that you defend it correctly by noting the time-barred status
    of the debt. But collection activity well past the SOL is totally normal
    in the debt industry. Beyond the SOL, it just means that there are no real
    “teeth” to the process, because they can’t win in court against you.

  256. If the debt is beyond the SOL of 4 years in Texas from date of last activity. Can the lender request payment of the original loan?

  257. Loretta, it depends on how old the debt is and whether or not it’s a debt
    purchaser that you’re paying off. Often, there are 2 credit entries, one
    by the original creditor showing a chargeoff, and another by the debt
    purchasing company. If that’s the case, then whether you pay in full or
    settle with the purchaser, it won’t affect the chargeoff listed by the
    original creditor. If it’s all a single entry pertaining to the original
    creditor, then paying in full will be *slightly* better in terms of how
    it’s reported than a settlement would. However, either way, it will still
    show as a paid collection account, and the reporting difference on an
    old collection account is very minor when you compare a paid collection
    account to a settled collection account.

  258. I have a charge off on my account and I have been making payments for two years to a collection agency, the original amount was over $7,000.00, and now I owe about $2,000.00. it is listed as a charge off on my credit report. If i make a settlement (agree to pay a lesser amount than owed to satisfy the debt) how will that effect my credit report. Am i better of to just keep paying so it is paid in full instead of settled? thanks for your help.

  259. Tony, these are two totally different questions you’re asking. If the
    derogatory entry is older than 7 years, then it should not reappear on your
    credit report again. If it does, then it’s probably not because of anything
    done by the original lender. More likely, it’s a debt purchaser placing a
    bogus fresh “date opened” on the account, in which case you should be able to
    dispute it off the report again by filing a dispute with the three major
    credit bureaus. If the derogatory item is less than seven years old, then yes,
    it can still come back later. The above pertains to your credit report only,
    which has *nothing* to do with whether or not you’re still legally obligated
    to pay the debt. Just because a debt disappears from your credit report does
    not mean that you are no longer liable for it. That depends on whether or
    not the debt is beyond the legal Statute of Limitations for your state. In
    some states, the SOL period is as little as 3 years, in others in may be 6,
    8, or even 10 years. And yes, the lender can ask you to pay up regardless
    of what does (or does not) appear on your credit report.

  260. Once a negative charge off has been removed from your credit report. Can the lender post the information again? If the account has been charged off but never settled and it has been removed from my credit report. Can the lender come and request payment of the original loan?

  261. Loretta, it depends on the situation. If the agency is a debt purchaser,
    or is representing a purchaser, then it may be possible to get them to
    adjust the entry on your credit report. This assumes that the purchaser
    placed an entry on the file. However, this will not affect the chargeoff
    record entered by the original creditor. If the original creditor still
    owns the debt, then they will normally update accounts as “paid collection
    account” once it has been satisfied. A “paid as agreed” will not necessarily
    help your score, because it usually will not erase the original late-payment
    history that appeared previously. Either way though, getting the debt paid
    off will help improve your debt-to-income ratio, so future lenders will no
    longer consider it to be an “open” obligation. So even if your score doesn’t
    come up significantly, there will be a separate beneficial effect to handling

  262. I have a “charge off” and I am paying off the collection agency monthly. thr original amount owed was $7,000.00, I owe $2,000.00 now. Do you think I have a chance of having them agree to a “paid as agreed” note on my credit report?

  263. Marika, you should try to continue negotiating with the lender to
    avoid the chargeoff and/or reposession scenario. They may or may not
    be flexible, but often lenders will work with you. They really don’t
    want to repo a vehicle if it can be avoided. If you let the March 5th
    deadline come and go without an arrangement in place, then most likely
    they will repo the vehicle, auction it (for a lot less than it’s probably
    worth), and then try to collect the unpaid balance from you. This will
    usually be through collection agencies, and it can even result in legal
    action against you for the unpaid balance. So in this type of situation,
    you should make every effort to work out arrangements with your creditor.

  264. My situation is a little similar,I have a vehicle which I still have. The maturity date was Nov 5 after March 5th the loan will be either a charge or repo they tell me. I have been talking to them and paying them something each month.The only thing is I can’t pay the full amount by March 5. What usually happens next?

  265. Priya, tax responsibility depends on (a) whether the creditor issues
    a 1099-C to record cancellation of the obligation, and (b) whether or
    not you were insolvent at the time the debt was forgiven. If you were
    grossly upside down on the house, then you were probably insolvent, meaning
    you owed more in debt than you owned in assets. See IRS Pub 908 for more
    information. Also, if you don’t get a 1099-C, then that means the creditor
    has not formally forgiven or cancelled the balance owed, so open debts
    like this (whether or not they try to collect) normally do not trigger
    a tax event. See your tax professional or CPA for a more formal opinion.


  267. Derogatory items are supposed to drop off after seven years. However,
    the credit reporting system is very sloppy, and it’s usually necessary
    to monitor the report and dispute anything that should not appear. What
    Mari needs to do is write to each of the three major bureaus (Experian,
    TransUnion, and Equifax) and dispute the old negative item. This will force
    the bureaus to investigate and delete the entry if it’s been longer
    than seven years. All three bureaus provide online dispute forms, so
    the dispute can even be initiated via the Internet.

  268. So it’s been 7 years now since my account was opened 2/00 and of course it’s showing up as a “charge off” what’s next? How do i get this of my credit report, i hear that after 7 years it no longer shows up. It’s now Dec 07 and i still see it. What can i do?

  269. In response to Jose’s question, I first need to point out that the blog
    entry above pertains to unsecured debt. A vehicle is a secured debt, so
    there is an extra factor involved in who has title to the property.
    Just because the loan was recorded as a chargeoff does not clear the
    title. The lender still holds the title. Just because the vehicle was
    totalled, that does not relieve the original financial obligation. So,
    no, they will not release the title because the loan is listed as a

  270. Okay so my bank has done a charge off on my vehicle they have never reposeed it. Now the vehicle is totaled. Will they release the title of the vehicle since its a charge off?