Creditor Remedies

• A creditor has three primary options when dealing with a charged-off debt. It can either continue to pursue collection efforts on its own, assign the debt to an in-house collection agent or sell the debt to a third-party debt collector. As part of its collection efforts, the creditor or debt collector may choose to pursue a civil lawsuit against you. If the creditor or collector is successful in obtaining a judgment against you, it may attempt to garnish your wages, seize your bank accounts or attach your personal property to satisfy the debt.
  
  

Time-Barred Debts

• If you have a charged-off debt that is several years old, it may qualify as a time-barred debt. A time-barred debt is one that has exceeded the statute of limitations for debt collection. The statute of limitations on debt varies from state to state and typically depends on the type of debt involved. If you owe a charged-off debt that is outside the statute of limitations, your creditor cannot seek a claim against you in civil court. If at any point prior to the expiration of the statute of limitations you make a partial payment or a promise to pay, the statute of limitations starts over.
  
  

Charge-Offs and Credit

• When you fail to make timely payments on a debt, your creditor can report this information to the credit reporting bureaus. Negative information entered on your credit report can remain for up to seven years. During this period, you may find it difficult to obtain new credit or favorable interest rates. Choosing to repay a charged-off debt does not remove the negative information already reported and it may not necessarily boost your credit score. If you do choose to pay, negotiate with the creditor to have the account reported as paid as agreed or paid in full, which can minimize some of the damage. Consult a certified debt counselor or qualified bankruptcy attorney to determine your options for dealing with charged-off debt.
  
  

Considerations

• If you have a substantial amount of charged-off debt that is still within the statute of limitations, filing bankruptcy may be your only option for protecting your assets. When you file a Chapter 7 or Chapter 13 bankruptcy petition, the court places a stay against your creditors, which prevents further collection actions. Depending on which chapter of bankruptcy you file, you can either make payments on your debts or eliminate them entirely.