Can A Collection Agency Claim On My Charged Off Debt?


Can a Collection Agency Claim on my Charged Off Debt?

How do ‘Charged Off' debts affect my credit score?

Dear Kim,

I received a letter from a collection agency on a debt that has been charged off. I didn't think the creditor could still come after me if the debt had been charged off. Am I responsible for paying this debt?



Dear John,

The short answer to this is, yes, you are responsible for paying this debt.  Many consumers are under the assumption that charged off debt is the equivalent of cancelled debt; unfortunately, this is not accurate. To put it in basic terms, lenders have profits and losses. After a debt has typically remained unpaid for 6 months, the creditor puts the debt into a charged off status. The creditor has moved the account from the profit column over to the loss column, because there is a chance they will not recoup their money. It also means that the account has been closed for any future use.

The impact that a charge off can have on a consumer is significant. Once the charge off is reported on your credit report, your credit score will most likely drop. Creditors will often sell these accounts to collection agencies, making it almost impossible for the consumer to work with the original creditor. The charge off will also remain on the credit report for 7 years, which may impact your attempts at future credit, such as a home and/or car purchase.

I strongly advise against ignoring the debt. The fact that an account has entered the charge off status is indicative of a larger money management challenge. I suggest that you reach out to one of our Certified Credit Counselors at 1-800-992-4457 to discuss the charge off and your current financial condition.

Good Luck,

Kim headshot 3

Kim Cole is the Education Outreach Coordinator for Navicore Solutions. Kim provides financial education workshops and seminars to communities. Readers can submit general questions relating to personal finance, credit scoring, debt management, student loans, home finance or bankruptcy which may be highlighted in the next month's edition. All identifying information will be kept anonymous.

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