First, what is a charge off?
The Internal Revenue Service allows creditors to charge off debts that are unlikely to be paid. The IRS rule regarding the “Specific Charge-Off Method,” is a way for a company to take a loss for income tax purposes. If the company subsequently collects on the debt, it must declare that income to the IRS. Bad debts are written or charged off as a way for a company to balance its income sheet.

A charge off to a bad debt is a company’s internal way of balancing its books and to take advantage of an IRS rule. Companies can continue to pursue payment for charged off debts but would have to abide by your states statute of limitations. Also any debts in excess of $600 charged off must be reported to the IRS and the debtor will receive a 1099C to file with their income taxes as unearned income.

The reporting time for charged off debts as stated under Running of Reporting Period - Section 605 [15 U.S.C. § 1681c] is as follows: Charge-Offs - Seven years. The time runs from the date of the delinquency, plus 180 days for a total time of 7 1/2 years!

Example, If a payment was due on an account on January 1, 2000, and the debtor defaulted, and never caught up to become current. The account is eventually declared a charge-off by the creditor, then the seven year reporting time limit starts running on July 1, 2000, with the item scheduled to expire from his/her credit reports on July 1, 2007. (you can read more about this in the source area)

Your credit report will show the date that the listed debt is scheduled to be removed from your report. If the debts are close to being dropped, then you might just as well let them go and save the money.

If they have not already been awarded any judgments to collect by now, then it is most likely too late for any 3rd party collection agency to take legal action.

BUT be prepared for some bottom feeding collection agency to buy the debt portfolio and then try and collect on the debt. If someone does, inform them that the debt is time barred and send a cease and desist letter to get them off of your back.

Hope this answers your question. Sgt Big Red

“According to the FCR Act Section 605 a debt can remain on a credit report for 7 years and 180 days after the delinquency that caused the account to go bad. Sometimes creditors will sell their bad accounts or post information on the credit report to show an activity date that is less than 7 years. THIS IS PROHIBITED. (I ended up having a judgement removed, the collection accounts removed, and the original creditor account removed.) In short, the time clock starts on the month the original delinquency started by the original account, regardless of whether the account has been sold to a collection agency, was paid at a later date, or a judgement was placed. The FTC has ruled this to be the law when it comes to time periods. If the credit reporting agencies are showing an account on your record that orginally went bad more than seven years ago, regardless of date of last activity, dispute the information and they will have to remove it. The reasoning behind this is similar to chapter 13 bankruptcy which stays on your credit for just 7 years instead of chapter 7. The courts have ruled if you did not file a bankruptcy and had several bad credit items they would strictly fall in under the chapter 13 guidelines. I ended up paying on debts that were less than 7 years old and had all the collections, judgements, and original creditors of more than 7 years removed. Even though the judgement was only 2 years old and unpaid and the collection account was only 3 years old, they were still bound to the time line of the original creditor. This regulation prevents accounts from staying on your credit forever.” Thomas

Bad debt written off means that the original creditor could not collect the money, so the debt was written off their books, and sold to a collection agency. Dixie Darlin’