Here’s a deeper explanation of a charge-off and what it means to have bad debt Via ForbesAdvisor
Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but that doesn't affect our editors' opinions or evaluations.When a financial obligation goes unpaid—whether it’s a credit card, loan or medical bill—it may eventually be charged off as bad debt. In simple terms, a charge-off on your credit report means that a creditor assumes a debtor has no plans to repay a debt voluntarily.
When an account is charged off, the creditor writes it off as a financial loss. The account is closed and the debt may be sold to a debt buyer or transferred to a collection agency. Once the creditor wipes the account from their books, it’s charged off as bad debt. Just like late payments and other negative credit information, charge-offs can linger on your credit reports for up to seven years. The creditor, or the entity that owns the debt if it’s been sold, also can move ahead with collection actions.The short answer is, yes, you can be sued for a charged-off account.
If you’re sued for a bad debt associated with a charged-off account, it’s important to know your rights. First, your creditor has to serve you with proper notice of a debt collection lawsuit. Once you’re served, there are several things you can do:Go to court and challenge the validity of the lawsuitYou could offer to make payment on the debt in full with a payment plan. This could help you avoid a lawsuit and further credit score damage.
Debt validation means the debt collector has to verify that the debt is yours. You can request a debt validation by sending a letter to the collection agency. The Consumer Financial Protection Bureau
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