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Charge-off vs. Write-off


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Experian lists on my credit report that most of my old unpaid accounts as both charged-off and written-off. I believe Equifax sometimes does it as well. I want to know if anyone knows why the two different accounting terms are listed for the same account and what is the difference. I spoke to an Equifax representative, who spoke off the record, and he said that a written-off account cannot be sold or legally collected by the creditor or debt buyer because it has been removed through the accounting process as a loss of profit (charge-off) and then written-off as uncollectable. I spoke to 2 different attorneys, one said he'd didn't know what the exact difference was and the other said they meant the same thing. It doesn't seem to be necessary to list the same account as 2 different things if they have the same meaning. Can someone please tell me what the difference is and if there is some law that backs up the differences so I can try to remove these items from the CRA's. Thanks.

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Hey there, welcome...

There are no laws governing the use of terms on a credit report (with only a few exceptionns). Therefore, CRAs often use terms that seem designed to cause confusion. "Charge off" and "Write off" are used interchangably, although, in general, CO should mean "charge against income for P&L purposes" and WO should mean "written off per FDIC regulations". The only sure way to tell from your credit reports which is who is if the tradeline says "Charge off / sold to another lender" and the balance is set to $0...in which case a junk debt buyer might be contacting you.

The IRS has even waded in to generate even more confusion. If an account is delinquent and no "identifiable event" (such as attempted collection) has happened for 3 years, the creditor is supposed to write off the account and issue you a 1099c for the "found income"...on which you get to pay taxes, plus penalty and interest dating back to the "date of first delinquency".

I've often suggested that when an account is listed as CO, the debtor should contact the OC and insist that a 1099c be issued. Ther have been some court rulings that state that a 1099c in effect turns the debt over to the IRS and can therefore not be sold or transferred to a JDB.

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All the old accounts on Experian are listed as both. Should I insist on the 1099c for all those accounts? I assume the taxes are based on the write off/charge-off amount and not whatever the actual debt was. Do you know what the IRS rule is that would state that they can no longer collect or sell the debt? Thanks for the help.

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It certainly wouldn't do any damage if you were to contact the OC (do not call CAs) and ask for your 1099c. In general, talking with OCs is okay, although you do run the risk of waking a sleeping giant.

As for the IRS regs relating to the 1099c, go to www.irs.gov and search for 1099c.

The rules are more along the lines of...when an OC determines a debt is uncollectable, and gives up trying for 3 years, then they are supposed to issue the 1099c. The rules don't say anything what happens after that...so, if for example, you decided to pay the OC rather than the IRS, they could probably revise their books to take your money.

On the other hand, there have been some court cases (again, you'll have to search) where a JDB sued to collect on a debt for which the OC issued a 1099c to the debtor. Since the debtor had already paid taxes on the found income, the case was denied.

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