This post is part of our “Charge Off” series and discusses what typically happens with your unpaid accounts after they are charged off and when the loan or credit card balance is assigned to an outside debt collector.
In order to have reached charge off, you will have survived the many collection attempts from your original creditor that typically last six months. Here is where your account goes from the frying pan to the fire. This is where your stress level regarding unpaid bills will increase. I know, as if additional stress was even possible….
Unpaid Accounts are Charged Off as an Accounting Function
Creditors have three options available to them once they charge off an unpaid debt. The most popular of the three, at least with newly charged off accounts, is to place the debt with a collection agency.
Debts placed with an outside collection agency are generally done on a contingency basis and with short time frames built into the assignment contract. This means the debt collector gets paid if and when they get you to pay as a result of their collection attempts. If they cannot collect from you they will lose the account.
The amount of time your account remains with a contingency debt collection agency will vary, but my experience is that they will have your account for a few months at a time.
The typical debt collector working for your creditor as an assignee has two primary tools available in their effort to get you to pay; your phone; and your mailbox. There are other methods of collection, such as calls to your work place, friends, family members, neighbors, but I want to keep the focus of this post to the most general efforts used by the debt collector who has been assigned your account just after charge off. This brief video will help to illustrate your options and how to time your negotiating efforts with debt collectors.
Debt Collectors Calling after an Account Has Charged Off
First, similar to when you first fell behind in payments to your original creditor, the phone rings with debt collector calls, a lot…. Next, the phone rings some more, and then… some more.
WARNING: Do not use your phone for target practice! You may need it later.
If you want to resolve an account that has been placed with an outside collection company, you will have opportunities to do so. Here are some important details to consider in your effort:
- You will have to pick up the 2 ton telephone receiver and call the debt collector in order to identify your available options with the account. I would not limit yourself to written communications.
- You will be speaking to someone who has been trained to push your buttons using the most effective and proven methods for collecting debts.
- The collection agency can only work out arrangements for payments that are consistent with the guidance they have been given by their boss – the bank that issued you the credit card.
- You will not be able to re-age the account after the credit card is charged off.
- Avoid some of the nut job advice on the internet about handling this stage of collection
- In some ways you have more payment options with charged off credit card bills than you would with the original creditor
- The debt collector only gets paid if they can get money from you
When a Charge Off Gets Reported to Your Credit Report
You should know that a charge off event is going to be reported to the credit reporting agencies and will appear on your credit report for about 7.5 years from when you missed your first monthly credit card payment .
The reason to point this out is that once the credit card is charged off, the damage to your credit is now done. You do not get to re-age charge off accounts. The credit damage from not paying a charged off account can now get worse by being sued, followed by a judgment entered against you. A judgment can later show up in the public record section of your credit profile. Also, a collection trade line may later appear on your reports, and this would be considered additional damage (this aspect will be covered in additional posts to the Charge Off series).
Any threat or comment from a debt collector about how you should be concerned with your credit report and score after the account they are collecting on is charged off is just a collection tactic. Collection agencies will have no ability to change how your original creditor reports the debt to Equifax, TransUnion or Experian. If you feel a debt collector has used your credit scores and reports in an unfair or deceptive way during a collection attempt, post about that in the comments below and I may be able to offer feedback about how to deal with that.
Negotiating Lower Payments with Debt Collectors
There are tactics and timing you can learn that will better prepare you for dealing with outside debt collectors trying to get you to pay a charged off credit card bill. I cover some of the basics in the above embedded video. Here are some additional way to optimize results:
- When and how to get a deal by settling a charged off credit card debt.
- When to pass on an offer because there is a high likelihood a better debt settlement offer will be available later, or because the offer is a stretch for you financially.
- What your specific creditor will allow the debt collector they hired to do when settling or accepting payments on the charged off account (which leads to you getting the best deal).
- The tricks and tactics that debt collectors will be use to get you to pay more than was necessary.
- What is considered debt collector abuse and violations of fair debt collection laws.
- You can get professional debt help at an affordable cost.
If you post more about the debt collector and the accounts you are dealing with (collection agency name, original creditor name, balance owed, when you last made a payment, what state you live in, etc.), I can offer helpful feedback to you about each of the above bullet items.
If you are struggling with multiple credit card debts that are in the post charge off debt collection stage, it is important to understand your options and identify your resources for handling the accounts before they end up in, or are immediately placed into, the more advanced stages of debt collection – which can include being sued by a debt collection attorney.
It is sometimes important that your next step to deal with your now charged off debt be the step you take to put the debt to rest before the situation can deteriorate further.
Anyone with questions and concerns about a charged off credit card debt is welcome to post in the comments below for feedback.
Hi Michael,
I have $25,517,33 of credit card debt being held by Bank of America. It has not been charged off. Last payment $328 was made today 12/31/24 to avoid the charge off. They offered a 45% settlement on 10/28/24. Then 55%, and now the current settlement offer is 80%.
Bank of America can come across a bit punitive with the way they do settlements.
I suggest getting some help with this.
You can schedule a call with me here: https://calendly.com/debtbytes/15min
How did they made an offer withhout it being severely late?
I had my personal information stolen and used to open an Aspire credit card. After I vacate aware of this I filed a police report and informed the credit agencies. Aspire wanted me to name a to name a roommate in the police report but I declined because of his innocence. I later discovered a likely suspect but when I contacted aspire I was told the file was closed and there was nothing they could do inspire of my having new evidence.
Today I got a letter fromCKS financial.
What is my best move but I do not want to pay a debit that I don’t own?
Are you saying the outcome of the ID theft is they refused to recognize the fraud because you did not who did it?
Check out my article about how to file a complaint against Aspire with the CFPB.
Hi Michael,
I have 3 questions as follows: 1) After a credit card debit has been charged off and a law firm sues, is the debt still with the credit card issuer (Capital One)? I asked the collector/law firm personnel if they had bought the debt and they said no that it was still owned by Capital One and they are collecting the debt on bank’s behalf. Is this correct? 2) How can I better negotiate the debt? The balance is $5100 but they would only reduce by $700 and says that is all the leeway they have. 3) If I agree to come up with the lump sum, how much time in general will I have to to make that full payment?
Thanks,
Rene
Received a call from from United Law group at my work today and they also called my brother. They stated this bill was from Household Bank under Capitol one. I don’t remember this account but they had all my personal information. Giving me today only to make a settlement payment. They offered to let me pay in 3 monthly installments. I live in West Virginia. They would not give me any information on when the account was closed. If I do owe this accountit has to be from at least 9 or 10 years ago.
I have a debt that charged off for $4500 back in 2014 and now I’m getting a notice from a collection agency with a copy of something showing they are ready to file a lawsuit and have the papers ready to file in the court if we don’t pay it asap. It all looks fake and I’m trying to figure out if this is all a scam or what…
What state are you in? When did you stop paying on the account at issue? Who are all the players involved (original creditor, debt collection company and/or collection law firm)?
Live in Texas. Citibank was original creditor and with midland collections and Scott and assoc law firm now. Stopped paying in like Aug if 14
It is highly likely it is for real. What is your goal for resoling this?
What did you do?
I have several debts both credit card, medical, and dental that most have been charged off. I am making a small payment to each trying to show that I know I owe the debt and was told as long as I make some monetary effort, they are not able to proceed with legal action. I hope this is the case?? Many of these are accts that have been sold to debt collectors. There is no way I can even come close to the settlement amounts being proposed. I do want to pay something to show I want to pay the debt, especially the medical bills that I do believe payments are going straight to the original debt holders. However I have been in contact with some of the credit card companies that have let me know the debt was sold. My question regarding this is, what legal action if any can they take against me. A couple of the credit collectors have actually used bullying and threats with me and one in particular told my place of work that they had to speak to me because I had a claim against me and had to be in our county’s circuit court the next morning at 9:00. She also told me that I had a felony fraud charge and when I questioned this, she denied she said it although over and over she was telling me the conversation was being recorded. I let her know I was happy about that. When I asked to speak with someone that was willing to answer questions she threatened me that if I didn’t let her help me, she would follow through with legal action immediately. I am making an effort to pay, but at this point does it really matter since the original company is not receiving the money? I am following David Ramsey’ s plan and will pay more as I get others paid off, but that matter? Can they still pursue me legally? Thank you so much for your help. Reading some of the other posts and replies have been helpful as well.
You were told wrong. Making small monthly payments that do not meet a required minimum, or are not part of an agreement you set up, will not rpevent further collection action. And depending on how small a payment you send, you are not putting a dent in the debt at all.
The collector that told someone at your job about a court hearing is likely a debt collection scammer.
I like Dave, but his advice about paying is far from helpful in some scenarios like yours.
How much does all the debt add up to?
Hi Michael, I had a charge off from a husqurvarna credit card. I had 2 accts totaling around $15k. The question is i just received a letter from an atty representing portfolio recovery assoc. not husquvarna. And it was only for one of the accts. How can a debt collector be using an attys office to a debt the dont own. Should i worry about this?
Yes, you should be worried about this. PRA is a debt buyer, and they sue a lot. You are about to be sued, as evidenced by the attorney contact.
Debt sales are common. You can settle in your situation for sometimes half the balance owed. You can fight the litigation. You can file bankruptcy.
Doing nothing is not a great option when things get to this point, but it is the path many choose.