Legal Question in Bankruptcy in Indiana

Re: charged off bad debts

A "charge-off" is an internal accounting measure used by the creditor. It means that the creditor considers the loan to you to be a worthless asset. Creditors are often required to do this by state or federal regulations, which provide that if a loan has been several months delinquent, it must be removed from the creditor's asset base. So it's just a common sense way to show investors and regulators what the creditor's true asset value is.

But that doesn't mean the creditor can't try to convert this worthless asset into something positive. As an attorney for credit unions, I have never had a case assigned to me unless the loan was a "charge-off." I then sue the debtors, and if I ever collect the money, there is great rejoicing in heaven, because the money collected on a "charge-off" goes straight to the credit union's bottom line; it's free, unexpected income.

So if you are contemplating a bankruptcy absolution of your debts, be sure to include even the charge-offs.