Potential clients ask me all the time what it means if their credit report says that a debt was "written off" or "charged off." Their wishful thinking wants it to mean that the debt doesn't exist anymore and they will not have to deal with it ever again.
Unfortunately for them, that is not the case. When a creditor reports that a debt was written off or charged off, it simply means that for their bookkeeping purposes, they are no longer collecting the debt. However, someone else may be. Most creditors will spend time attempting to collect money from a customer before they charge the account off. That may be a few months or a few years. Once the creditor has made that decision, it typically will sell the account along with hundreds or thousands of other uncollectable accounts. Collection agencies buy these accounts for pennies on the dollar and they pick up the challenge of collecting against the person owing the debt.
Collection agencies have a reputation for being very aggressive in their efforts. They are good at causing enough stress and fear that the person owing the money will find a way to send a payment, even if it means incurring a new debt. As the saying goes, "you can't squeeze blood from a turnip," many people can't afford to make payments no matter how threatening or harassing these collection agencies may be.
Whether a person can make small payments or no payments at all, the thing not to do is bury your head in the sand. Eventually the collection agency will tire of unsuccessful attempts at collecting on the account and will send the file to an attorney's office for legal action. At this point, the situation can get out of control fast. If the person owing the debt does nothing, there is a possibility their wages will be garnished and bank account may be seized.
Before the situation becomes this serious, it is a good idea to become informed about options available. Whether it may be credit counseling, debt consolidation or bankruptcy, it is better to know the alternatives than to live in fear of what may happen to the next paycheck or deposit.
• Denise K. Aguilar is an Ahwatukee Foothills attorney whose bankruptcy practice focuses in consumer and small business bankruptcy. Reach her at (480) 455-1881 or www.aguilarlawonline.com.