Legal Question in Credit and Debt Law in Indiana

Re: charged off credit

"Charged off" is basically an accounting term, and has nothing to do with the validity of the underlying debt. For example: When a bank makes a one million dollar loan to someone, like you, at six percent interest, then the loan is placed in the bank's "performing asset" category. By lending you a million dollars, the bank creates an asset for itself, and records earnings of six percent per year, sixty thousand dollars. Looks easy. But say you are three months behind on your loan payments. Then the bank would be misleading itself, and anyone else who cares, to continue to report the million dollar loan to you as an asset earning six percent. So your loan might be placed in another category, maybe a nonperforming asset category. And if you were more delinquent, say six months, then the bank should "charge off" the million dollars to you. That means the bank is reporting the million dollar loan as a loss, and the entire million dollars is subtracted from income. But the loan is still enforceable against you. So the bank will sell this asset, usually at a very deep discount, to a debt collector, who will pursue you to the end of time or a bankruptcy discharge to make you pay, because almost every dollar they get out of you is profit. There may be many defenses against the legal obligation to pay, but "charged off" is not one of them.