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What Does It Mean if My Account Was Charged Off?

Stack of final and past due notice letters

When it comes to debt collection, there aren’t many terms that confuse consumers. Most of us are familiar with what a debt is, a late fee charge, and interest rates. Similarly, most of us know what a dispute of debt means and what a lawsuit is.

Stack of past due and final notice letters

However, many people are unfamiliar with the term charge-off and what it means. In large part, this is not your fault. Depending on who you ask, the definition of a charge-off may change.

For instance, major credit reporting agency Experian has defined “charge-off” as:

“the credit grantor wrote your account off of their receivables as a loss, and it is closed to future charges. When an account displays a status of ‘charge off,’ it means the account is closed to future use, although the debt is still owed. The credit grantor may continue to report the past due amount and the balance owed. If you pay the account, the status will reflect as a ‘paid charge-off.’ The charged-off account will remain on the credit report for seven years from the original delinquency date of the account, which is the date of the first missed payment that led to the charged-off status. Most lenders sell their charged-off accounts to a collection agency for a percentage of the account’s value. In that case, a new account will be reported from the collection agency that owns the debt.”

On the other hand, defines a charge-off as follows:

“A creditor’s profit depends on how successful they are in receiving timely payments from loans and collecting interest. Their losses commonly will be the result of someone not paying back their debt for a significant amount of time. When this occurs, the creditor will “charge off” the debt, essentially saying that they don’t expect it to be resolved and declare it a loss for the company.”

At Fitzgerald & Campbell, APLC, we can see why so many of our clients and potential clients are confused as to what a charge-off actually is.

Essentially, a charge-off is a decision made by a creditor that they are not going to get paid for your debt. Having reached this conclusion, the company wants to record this amount as a ‘loss’ (as opposed to an expected gain) for business and tax purposes.

Typically, creditors do not charge-off a debt until six (6) months after default, or the time which payments on the account become delinquent. Some companies wait longer. Once an account is charged-off, the creditor cannot continue to charge late penalties, interest fees, and any other finance charges.

However, this does not mean that you do not still owe the debt. The creditor will report the charge-off on your credit report, and they can still sue you for the debt later. Oftentimes, the creditor will sell the charged-off account along with millions of others to third-party debt buyers for pennies on the dollar. These third-party debt collectors will then start to contact you to collect the full amount of the debt, and may even try to sue you when you don’t pay.

If you are being harassed by a debt collector or have any other issue with creditors and third-party debt buyers, you need the help of an experienced debtor rights attorney—like those at Fitzgerald & Campbell, APLC—to review your case and discuss your options with you. Our attorneys have decades of experience representing clients in all types of consumer defense cases and we are here to help you!

Call us today for a free consultation at (844) 431-3851, or email us at

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