Legal Question in Credit and Debt Law in Indiana

Re: What Creditors mean by internal write off

A lender's write-off has no legal meaning for the debtor, who owes the entire amount due whether or not it is written off. Banks and other lenders list the value of loans they make to people as "assets" on their balance sheet. To accurately portray their financial condition, when a loan is in default for more than a few months, the bank must "write off" the loan. This means the loan must be deducted from the asset side of the balance sheet. Often this "write off' has to be deducted from current income, and when this happens, a lender is sometimes inclined to accept less than full payment in satisfaction for the debt, because everything received will be treated as income.