A blemish on your credit report can hamper your financial plans. If you fell behind on credit card payments and it resulted in a charge-off, you are probably eager to see that negative item go away after a few years. But can it come back? Once an account has been charged-off, technically it cannot come back in its original form. However, the debt still exists and can present itself in several other ways.
Once a debt has been charged-off, the original creditor who has loaned you the money has decided to stop pursuing their claim. That being said, this does not mean all is forgiven. In fact, the creditor will likely transfer this debt to a collection agency, who can legally continue pursuing repayment until the statue of limitations expires.
What Is a Charge-Off?
A charge-off is a debt that a creditor stops trying to collect. For example, if you stop paying your Visa credit card bill, after a few months the credit card company might give up on trying to get you to pay. Instead, they charge off the amount you owe and take it as a loss on their taxes. It appears on your credit report as a charge0-off, meaning you no longer owe the credit card company the past due amount. However, that does not mean you magically don't owe the debt. Once the account has been charged off, the creditor turns the account over to a collection agency, and then they attempt to collect the past due amount. After seven years from the point the account became delinquent, most charge-offs are removed from your credit history. But technically you are still on the hook for the money.
Even if the charge-off is removed from your credit history, that does not mean attempts to collect the debt will end. There is a whole industry dedicated to settling old debt, also referred to as stale debt. Although the more severe threats such as a court judgment and wage garnishment are no longer allowed (the went away once the seven years had passed), a collections company can still try and get you to pay the debt or at least a portion of it. So, although technically the charge-off isn't resurrected, after seven years you can still receive calls and written correspondence requesting payment.
Statute of Limitations
It's been a year since the charge-off was removed from your credit report, but you're still receiving calls and letters from collection agencies. You might be wondering how long this will go on. The short answer is: it could go on forever. The debt can be sold and resold repeatedly in the hopes that you'll eventually cave and pay it some portion of it. However, because of the statutes of limitation on debt, once that time frame has passed, you can simply tell the agencies to stop calling. The statute of limitations varies by state and type of account, but generally speaking for accounts such as credit cards it's three to six years and for contracts such as car loans it's six to 10 years after the charge-off. So if you're getting calls about a credit card that was charged off 10 years ago, tell the agency to stop calling you. But be prepared to tell that to every agency that calls about it. Or, if you're tired of the calls and are in a position to do so, negotiate a settlement amount and pay it, taking care to get the agreement in writing.
- Suze Orman: Charged-off Credit Card Accounts Can Come Back to Haunt You
- Bankrate.com: Debt Dropped From Credit Report Still Owed
- Bankrate: When does old debt fall off credit report?
- Nolo: The New Bill Collector Tactic: Jail Time
- Charge-off - Wikipedia
- Equifax. "What Is a Charge-Off?" Accessed Oct. 15, 2020.
- United States Courts. "Discharge in Bankruptcy—Bankruptcy Basics." Accessed Oct. 15, 2020.
- Consumer Financial Protection Bureau. "My Debt is Several Years Old. Can Debt Collectors Still Collect?" Accessed Oct. 15, 2020.
- Federal Trade Commission. "Fair Credit Reporting Act § 605. Requirements Relating to Information Contained in Consumer Reports." Pages 22-23. Accessed Oct. 15, 2020.
K.A. Francis has been a freelance and small business owner for 20 years. She has been writing about personal finance and budgeting since 2008. She taught Accounting, Management, Marketing and Business Law at WV Business College and Belmont College and holds a BA and an MAED in Education and Training.