Legal Question in Credit and Debt Law in Pennsylvania

Re: charged off/sold credit debt

Many people make the mistaken assumption that a "charge off" is the end of a debt. That is not correct. A charge off is the process by which a creditor declares to the I.R.S. that the debt is uncollectable. Consequently, the creditor no longer declares the debt as part of its accounts receivable and as income. If and when money is actually received from the customer, it is then included as income to the creditor.

Despite creditors' statements to the I.R.S., they invariably continue to attempt collection. Many times, they will simply sell the account to another entity. In either event, the debt is still owed. However, no entity can sue you for a debt on which it has been more than 4 years since payment was made. If they do, you have a complete defense. Moreover, the creditor may be liable for violation of consumer laws.

Regarding settlement, creditors want to be paid. As long as you offer a reasonable payment arrangement, they will consider it. You may be better advised to consider other options. If you have other such debts, a bankruptcy will be much cheaper and simpler.

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