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when is charge off?


jr1129
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when do credit cards charge off your accounts? I have several I am behind on and right now providian (wamu) is offering me a settlement at 50% in 4 payments. I am 120 days late. It started at 70% the next month was 60% and now we are at 50%. I really don't have the money but I think with working LOTS of overtime I might be able to pull it off (am trying to avoid bk). I am wondering if I wait for one more month if the settlement might fall to 40% or will they charge it off at the end of this billing cycle? It seems like I might have read somewhere that charge off is at 180 days? Do they warn you and say this is your last chance to pay? LOL

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If the CC is issued by a FDIC insured bank, then they are required by FDIC rules to charge off non-performing accounts within 180 days. BUT...they can charge off earlier...AND...we have never been able to establish that the people that issue CC are really governed by this rule.

So...whether or not the account is close to CO is difficult to predict, and there is no evidence that it helps you one way or the other. The magical "wait until just before charge off, then negotiate a settlement because you'll get a better deal" phrase is one of those cooked up by the debt fixers to make it seem like they have a way to help you settle your debts. Also, charge off is just an accounting term that means "charge against income for tax purposes". It doesn't mean that they'll stop trying to collect the full amount...plus penalties and inflated interest.

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Thanks for your reply. I guess I should have explained my line of thinking a little better. I was thinking that at CO the cc company would then sell the debt to a CA and it would be easier and preferrable to deal with the cc directly instead of a CA. I am just triing see how much time I can buy before I am sued or am forced to file bk.:confused:

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...sell the debt to a CA and it would be easier and preferrable to deal with the cc directly instead of a CA.

First...right on...always deal with the OC...there's really no good reason to deal with a CA...you just can't trust them.

But...charge off doesn't have anything to do with selling the debt to a JDB. Most OC's will charge off a debt at 3-9 months so they can take a tax break, but they may continue to own it for years. The IRS gives them 3 years after their last attempt to collect to keep it on their books...so, basically, the OC could keep it for a long time.

At some point after CO, the OC might sell the debt to a JDB...but it usually has little to do with us, and more to do with making their books look better. Maybe they need to clean off their "non-perfoming" accounts, maybe they need to sort out their balance sheet, maybe they want a little extra income from the sale...you just never know.

But at some point...their TL on your CRs will change to "write off / sold to another lender". Thats when the JDB gets involved. And, depending on who that is, it may actually be easier to handle them. No...you don't want to "deal", in the sense of giving them money (it doesn't help you in any way), but you can use the FDCPA against them. A JDB that's got a "defaulted account" is still just another CA...they have to play by the rules, including getting detailed information on the debt from the OC...something that most are not able to do.

JDB's make their money by paying pennies on the dollar for debts, and then panicing the debtor into coughing up money.

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:)

++ Does this mean that after that three year window, the OC must remove the account from thier books?

No easy answer, I'm afraid. Its really just an accounting principle for tax puposes. I would bet, that if they choose to do so, the OC could reclassify the debt into some obscure category and continue to track it. On the other hand, the IRS rules imply that it should be shown as a actual loss...which means the OC won't get any further tax benefit for continuing to lose, and if they ever do collect, they'll have to treat it as income.

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CC = Revolving account.

Revolving account ratings

R1 = current

R2 = 30-59 days late

R3 = 60-89 days late

R4 = 90-119 days late

R5 = 120-149 days late

At this point the creditor does "something" because of the IRS rules WillingtoCope referred to. The CO activity must be completed by 180 days. In the financial world, when these procedures were established, 2 months wasn't a lot of time to get "something" done. CO has always happened quickly, but these rules are general. Repossessing a vehicle, or filing foreclosure papers (for other types of accounts) used to take a lot more time.

There is no R6 rating...Because of time frame allowed to creditors for the above actions.

R7, R8 are industry codes

R9 = default/collection/charge off

I explained all this so that you could see that, at 120 days past due, your account is going to be acted on, if it hasn't been already.

"...how much time...before I am sued or am forced to file bk..."

This data won't help you there. Creditors make decisions to file suit based on their own internal policies/procedures and the likelihood of success. You may NEVER get sued. And you can file bk at any point, before or after CO (provided that you qualify).

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Be Kind :oops: .........I am still in the early stages of training here. Does that mean they claim the account as a loss "more" than one year?

From an accounting standpoint, as long as its listed on their books as an account that they still own (even if its labeled as a "charge off") they can probably continue to accrue interest on it, and thereby accrue the phoney income. When they finally do get around to the "write off" stage, then they get to claim both the amount the originally loaned plus all accrued interest as their loss.

Us poor consumers are used to thinking in terms of operating on a "cash" basis...CC do their books on an "accrual" basis so that they can inflate their income and their losses as their particular balance sheet requires. The IRS does have rules that are intended to control that somewhat, but, there are many ways of getting around them.

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:)++ hi all, and thank you,

I am learning the hard way about the "inflation" on accounts. When my credit nightmare began, I thought I was about 17K in the hole. Now as the SOL's are getting closer, the valtures are claiming I owe 52K (7 accounts). Very long story, so I will save that for later. Thanks again.

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