Legal Question in Credit and Debt Law in California

Writing off a debt is an accounting matter between the creditor and the IRS. It allows them to take a non-performing asset (debt owed to them) to an expense (money loaned but never repaid). It does not cancel the debt. Creditors then frequently bundle these bad debts and sell them for pennies to collection agencies who then try to collect. When the creditor gets paid the pennies, they count that as income since they had previously expensed the whole debt as lost, leaving the net loss. The collection agency accounts for the purchase of the loans as an expense, and accounts for what they can collect as income. They expect to be able to collect more than they pay for the bad debts because they pay so little, which is how they make a profit. Bottom line: you still owe the money and they can sue to collect it for up to four years, or longer in some cases, from when the loan was due, unless you file for bankruptcy.