(April 4th,
2007)
Yes a charged off debt is still collectible
by creditors, even years after it has been written off. Most companies
have an account called Allowance for Doubtful Accounts that is
a Contra Account to the Accounts Receivable. The Internal Revenue
Service (IRS) allows companies to write off uncollectible debts
as Bad Debt Expense and take a loss on their income taxes. The
company writing off a debt as worthless does NOT have to go to
court (nor does it have to take the debtor to court) to prove
the charged off debt. However, the company can still use other
efforts to collect debts owed to them. If the company is successful
at collecting a charged off debt at a future date, they will have
to include this new income in their tax return.
Other companies will sell all their Bad Debt
Expenses they deem incollectible to Junk Debt Buyers, commonly
at dirt cheap prices. This means if you have a charged off debt
with a particular company, they can sell this debt to a junk debt
buyer and the junk debt buyer will use their collection efforts
to contact you and demand payment. Also, even if a certain debt
expires, debt collection agencies still have the rights to collect
debts owed. For more information on this, read the Statute
of Limitations on Debt Collection.
More Debt Management FAQs |
