Legal Question in Credit and Debt Law in Texas
Debt collection after Profit and Loss Writeoff
I lost my job a few years ago, and I had a personal loan with the employee credit union at the time. I owed $866.00 2 years ago. I was working on my bachelors degree at the time, and I could only find part-time work. I was only sent one notice of the account which I could not pay at the time. I moved
to be closer to my new job and forgot about the debt. Now, two years later a law firm contacted me about the debt. I am able to pay on it now and acknowledge my responsibility for it. I recently requested a copy of my credit report and noticed the debt in question on the report as being a "profit and loss writeoff". Can the creditor write the debt off and still collect the money from me? I am told that the original $866.00 has increased to $1070.00 now with interest. What is the consequences if I refuse to pay this? I will gladly pay it, but it is already on my credit report similar to a bankruptcy. They also reported the debt to Telecheck so that I cannot use personal checks anymore. What are my rights, or where can I find more information on this? Any help is greatly appreciated.
2 Answers from Attorneys
Re: Debt collection after Profit and Loss Writeoff
You have several questions in this post, and they are restated in this answer in slightly different form.
1. Can a creditor write off a debt and still seek to collect it?
ANSWER: In nearly every case, yes. This is because the write-off is an internal event in which the creditor has decided that the likelihood of collection is not a given. However, the creditor's assessment that collection will be difficult is not the same thing as forgiveness of the debt. There has to be something more than a write-off to show forgiveness. Since the creditor here is a credit union and subject to regulations concerning carrying assets (your debt, the credit union's asset), there is a good chance the credit union was required by its regulators to write the debt off. Remember, write-off is not forgiveness.
2. Can the creditor still collect interest on the debt, even if it is written off?
ANSWER: Yes. Remember that a write-off is not forgiveness. This means that your original agreement to repay, interest and all, is not affected by the write-off.
3. What if I refuse to pay the interest? You will be in default of the debt, as you are now.
4. How to repair the credit record? Obviously, this requires some negotiating. If you have the money to pay it ALL (including interest), it would be worth a shot to attempt to get the creditor to report to the credit bureau as having finally paid the debt off in full. This is not guaranteed, by the way, but may be something that you can work out.
Good luck.
Re: Debt collection after Profit and Loss Writeoff
Just because the debt has been written off does not mean it cannot be collected. Failure to pay could result in a judgment against your for the debt, interest, and attorneys fees. If you talk to the lawfirm collecting this debt, they might be in a position to negotiate a settlement for less than the total debt plus interest.
I don't know why telecheck would not allow you to tender checks on the basis of this bad credit report. I suspect that is a merchant decision based upon credit info provided by telecheck. If the info is accurate, then I see no recourse.
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