You may wonder how to charge off your balance when you are unable to pay. This sounds like a solution for someone who has no resources to make payments on credit card debt and consumers may hope for a charge off.
Truth is, this is a process that will damage your credit for up to seven years into the future and knowing how to charge off your balance doesn’t mean you’ve seen the end of that debt.
When Does a Credit Card Charge Off Balance?
As long as you are able to make the minimum monthly payment on your card, the lender will not take any action to collect more money from you. Paying only the minimum amount due each month is not a good practice as that alone can damage your credit rating.
Until recently, it could also raise the APR charged by the lender on your credit debt. New laws no longer permit lending institutions to change interest rates retroactively. They can, however, increase the interest charged on future purchases and may also reduce your spending limit.
This is because a consumer who pays only the minimum due on an account is considered a higher financial risk than someone who pays more than required on each monthly bill.
If you fail to pay monthly payments, the lender’s collection department will contact you repeatedly attempting to collect the past due amount. They will stop allowing you to charge to that account and will report negatively to the credit bureaus.
Failure to pay even when contacted by collections is how to charge off your balance. The lender needs to reconcile his own profit statements and will list the account as a charge off if it remains unpaid. This allows the lender to claim the amount as a loss and receive the tax benefits of the loss.
What Happens After a Charge Off
The lender will list your account as a credit card charge off balance but will sell the debt to a third party which is most often an aggressive collection agency. This agency will call you repeatedly and may even contact friends and family in attempts to collect the debt.
While lending institutions are cautious about following fair credit laws that limit what collection agents are allowed to do, the collection companies are often accused of violating consumer protections in their attempt to make you pay.
Fighting a Credit Card Charge Off Balance
The credit debt may be sold and resold several times as part of various investment packages that are so common in financial circles today. It may be necessary to hire an attorney to represent you should you be summoned to appear in a civil lawsuit attempting to collect the debt.
Such a lawsuit can be filed long after you proceed in how to get a credit card to charge off balance. There are many defenses a consumer can use to remove that charge off from his file and stop future collection attempts.
If the account was included in a bankruptcy action it should have been listed as closed and paid without further action from you. Lenders do not always record bankruptcy actions reliably. This may be accidental or may be intentional as selling debts to collection agencies can be another source of profit for a lender.
An attorney can answer a court summons or can respond by letter to collection agencies to argue the validity of the debt or proof of ownership of the agency attempting to collect the debt.
Charge Off Balance to Your Benefit
Robo-signing is a practice that led to problems for lenders foreclosing on homes and the same practice exists in the area of credit card charge offs. When debts are sold and resold, the paper trail often becomes impossible to follow.
You may know you owed the initial debt yet a court may throw out the claim in your favor if the collection agency cannot provide proof that you owe that particular agency.
Recommended Reading
- Is it hard to consolidate your cards by yourself or should you hire a third part?
- Tips and strategies on credit card bankruptcy and how to stay away from it!
- Should you use a debt settlement company or skip them completely?
Summary
Obtaining a card in order tto charge off your balance is not something you might think of until you are faced with credit card debt you cannot pay. A charge off is not forgiveness of the debt but simply a lender’s acknowledgement that his bank cannot collect from you.
The debt does not disappear and can return to haunt you year after year if the debt paper is sold multiple times in the secondary financial markets. However, if you are willing to put up with the stress of collection calls and possible embarrassment, there is a good chance you will never be forced to pay the charge off balance.
