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What is a Charge Off?


Colormepnk14
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I received a letter from Cap 1 saying at the end of this month, our account will be a charge off? What exactly is a charge off? :?

Of course Encore has been calling us. I'm mailing a DV tomorrow to them. They told me to mail it to Cap 1, but reading other posts, I'm mailing it to their KS office.

Thanks!

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"Charge-off" is nothing more than an accounting term. What it means is that they will move the debt from the performing (paying) side of their ledgers to the non-performing (not paying) side. They write it off as a bad debt on their books and they get a tax break with the IRS for doing so. It also keeps stockholders happy to not be carrying millions in bad debt on the books.

Creditors typcially charge-off at no later than 180 days of insufficient paymetns or non-payment, though some will do it sooner at 120 days. Most creditors will then sell the bad debt to some junk debt buyer and wash their hands of it. Unfortunately, Crap1 collects its own bad debts, so they rarely sell them off.

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