What Happens to Charged Off Credit Card Debt?

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If you fall behind on your credit card payments, you face the unpleasant prospect of your credit card company listing your debt as a charge-off. A credit card charge-off is one of the more significant negatives you can experience as a credit card user. If you have debt charged off, you need to know how it affects you and what happens to the debt.


A charge-off is an accounting procedure. When you owe a creditor money and make regular payments, the creditor makes money off of you and the debt is considered an asset. If you ever fail to pay back the money by falling behind on payments, the lender, at some point, ends up losing money. At that point the lender no longer views your debt as an asset and lists it as a charge-off.

Charge Offs

Your creditors want you to pay back your debts because your creditor makes money off of you by charging you interest. If you don't pay, they don't make a profit and can lose the money they gave you. If you, for example, fail to make regular payments on your credit cards, your creditor will typically try to get you to pay. If enough time goes by without you making a payment, typically 180 days or more, according to Bankrate, the creditor may charge off the debt.

Debt Obligation

Many people believe that when a debt is charged off, they are no longer responsible for it. This is not true. Charged off credit card debt does not just go away, and the debtor is still legally responsible for paying back the debt. It simply means that your creditor has lost confidence in your ability or willingness to repay the debt and not views it as a liability and not an asset.


Creditors who charge off debt will still try to get their money back in one way or another. If the creditor cannot persuade you to pay the debt, it might sue you and try to obtain a judgment that allows it to take the money through garnishments or property seizures. However, the creditor might sell the debt to a collections company. If this happens, the collections agency may then try to collect from you because it becomes the legal owner of the debt.