What is involved with a charge-off during bankruptcy?

Answer by  patti (29325)

A creditor that learns that a debt cannot be collected then charges off the debt. This means it is a loss for the creditor. In the case of bankruptcy, the debt cannot be sold to other parties for future collection effort.

Answer by  idiotjones (705)

A "charge-off", whether during bankruptcy any other time, occurs when the creditor determines that a pursue payment of a debt is not worth the cost. That is, if a debtor owes $100 and the administrative cost of obtaining that $100 is $120, a loss will ensue anyway. This way, the creditor writes off the debt and takes the tax benefit.

Answer by  Potato (7)

A charge-off occurs when a creditor decides it won't be able to collect your debt, and writes it off in their taxes. You still owe the money, however, and your credit score is ruined.

Answer by  slkunz2003yahoocom (836)

A charge off simply means that your debtor wrote off the balance due as a bad debt before the debt was discharged in bankruptcy court. This will not really make too much of a difference on your credit report, as a bankruptcy is worse than a charge-off. Expect 10 years of impact on your credit report from this action.

Answer by  ybforz (83)

Bankruptcy includes forgiving all of your debt, yet for a certain period of time it is still on your credit report and background checks for several years. It is like starting over.

Answer by  elynne (1153)

It is the legal term that describes what your creditor will be doing with your debt with them. The amount of the charge off during a chapter 11 case will show up on your credit rating/ report for the next 7 years and will give you potential problems reestablishing a credit history

Answer by  eyeguy (3760)

If listed at the beginning of your bankruptcy, a debt is not allowed to be placed as a charge-off. A charge off is not legal while in bankruptcy

Answer by  tamarawilhite (17883)

If they charge off the debt, it means the loan originator says they cannot get it back and writes it off as a loss. You then will be taxed on that amount as income, because you spent the money and did not have to pay it off. This does hurt your credit score.