Legal Question in Credit and Debt Law in Virginia

Re: Charged Off Accounts and Collection

I'm not sure I'm really clear about what you mean by "charged off". If you're referring to the tax implications of the creditor having filed as an accrual-basis taxpayer for a deduction against the previously reported income, that's an accounting procedure that only relates to the relationship between the creditor and the United States. It has absolutely no bearing on the legal responsibility of the debtor. None at all.

If you mean that the creditor has sold the debt, then the new creditor is substituted for the old, unless there's a written contract that says they can't sell the debt; it still has no impact on the debtor's responsibility provided the old creditor gave written notice to the debtor.

If you mean that the creditor sent some kind of letter to the debtor waiving or forgiving the debt, then that clears it up for the debtor, who has to report the amount forgiven as income on his IRS 1040 form for taxes.

Unless the debtor has been released from the debt by the creditor, then, yes, the creditor can retain counsel and take whatever legal action is necessary to recover the amount due. I'd point out, however, that it often happens that people don't owe as much as corporate creditors claim, and there's a lot of fraud and abuse that goes on in assessment of debts. So the debtor should consult an attorney and/or an accountant to find out how much is actually owed and what steps he should take to resolve the matter.