This post is part of the Consumer Recovery Network & Debt Bytes “Charge Off” series and discusses what typically happens with your unpaid accounts “Post Charge Off”, when the balance is assigned to an outside debt collector.
In order to have reached charge off, you will have survived the many collection attempts from your original creditor that typically last six months. Here is where your account goes from the frying pan to the fire. This is where your stress level regarding unpaid bills will increase. I know, as if additional stress was even possible….
It is.
Creditors have 3 options available to them once they charge off an unpaid debt. The most popular of the 3, at least with newly charged off accounts, is to place the debt with a collection agency.
Debts placed with an outside agency are generally done on a contingency basis and with short time frames built into the assignment contract.
The amount of time your account remains with an assignee collection firm will vary, but it is usually no longer than 90 days.
The typical debt collector working for your creditor as an assignee has two primary tools available in their attempts to get you to pay; your phone and your mailbox. There are other methods of collection, such as calls to your work place, friends, family members, neighbors, but I want to keep the focus of this post to the most general efforts used by the debt collector who has been assigned your account just after charge off.
First, similar to when you first fell behind in payments to your original creditor, the phone rings, a lot…. Next, the phone rings some more, and then… some more.
WARNING:Do not use your phone for target practice! You may need it later.
If you want to resolve an account that has been placed with an outside collection firm, you will have opportunities to do so. Here are some important details to consider in your effort:
You will have to pick up the 2 ton telephone receiver in order to identify your available options with the account. Do not limit yourself to written communications
You will be speaking to someone who has been trained to push your buttons using the most effective and proven methods for collecting
The agency can only work out arrangements for payments that are consistent with the guidance they have been given by their boss, your creditor
In some ways you have more payment term options than you would with the original creditor
The collector only gets paid if they can get money from you
You should know that a charge off event is going to be reported to the credit reporting agencies.
The reason to point this out is that the damage to your credit is now done. You do not get to re-age charge off accounts. The credit carnage from not paying a charged off account can now only get worse by being sued, followed by a judgment entered against you. A judgment can later show up in the public record section of your credit profile. Also, a collection trade line may later appear on your reports, and this would be considered additional damage (this aspect will be covered in additional posts to the Charge Off series).
Any threat or comment from a debt collector about how you should be concerned with your credit report and score after the account they are collecting on is charged off is just a collection tactic. Collection agencies will have no ability to change how your creditor reports the debt to Equifax, TransUnion or Experian.
There are tactics and timing you can learn that will better prepare you for dealing with outside debt collectors. You can optimize your results by knowing:
When and how to get a deal
When to pass on an offer
What your specific creditor will allow the collector to do (which leads to you getting the best deal)
The tricks and tactics that will be used to get you to pay more than was necessary
What is considered collection abuse
You can get professional help at a reasonable cost
If you are struggling with multiple credit card debts that are in the post charge off collection stage, it is important to understand your options and identify your resources for handling the accounts before they end up in, or are immediately placed into, the more advanced stages of collection which can include being sued in order to force you to pay.
You can learn more about how “charge off” can be friend or foe by following the Debt Bytes continuing series on the topic: Click Here
It is important that your next step to deal with your now charged off debt be the step you take to put the debt to rest before the situation can deteriorate further. Find out how: Click Here to schedule a Consultation. A CRN specialist can assist you in learning the details you will need to consider once they know more about you. Consults are provided at no cost.
For readers of this blog who may be interested to know some brief history of debt bytes, here is a quick tidbit:
When Consumer Recovery Network launched in 2006, we started a newsletter called “Debt Bytes”. The newsletter was to be a monthly email to its subscribers. It wasn’t. I published very few newsletters for the fact that its subscribers were, for the most part, already CRN members who had unlimited access to a CRN specialist. If you didn’t know, our specialists deliver far more content than a newsletter.
This past May, I received a phone call from a friend who happens to report on consumer issues daily. Unbeknownst to me, he owned the debtbytes.org domain. He was calling to see if I had an interest in the domain name as it was expiring soon and he had no intention to renew it.
Well, I obviously jumped at the opportunity! Shortly after the domain transfer, Debt Bytes by CRN was born.
Guess what my friend said in response to my asking what I could pay him for the gesture?
Nothing. As in Free!
I coaxed him a bit and he suggested I go to www.donorschoose.org and identify a student based project that I would like to donate to. I had never heard of DonorsChoose. It is a fantastic concept for assisting class rooms and the children in them across the nation.
Because I identified so much with music in my youth and specifically guitar playing, I donated to a classroom in need of additional guitars in my friend’s name.
Here is an excerpt from the email I received from Donors Choose today:
“Consumer Recovery Network,
Mrs. Psomas sent Mr. Rhode photos and a thank-you letter
Steve Rhode runs www.getoutofdebt.org which is a site dedicated to consumer issues. I regularly read his site for the recent goings on by the many people and companies out to make a quick buck by capitalizing on the woes of the already struggling consumer. On a daily basis, since I have known Steve, he provides well qualified and absolutely free advice and feedback to consumers looking for answers and methods to manage their debt burden.
Steve gets flaming comment hits from time to time on his site. The comments I have seen are probably from people anonymously attacking him due to something he may have exposed as a bad practice or straight up rip off.
So to you anonymous flamers over at getoutofdebt:
Steve Rhode scammed me by giving me free stuff and asking to not be paid and instead requested I consider donating to children in the pursuit and enjoyment of music appreciation and education!
Man…. The nerve of that guy!
Thanks Steve! I shall throw down a few blues riffs on my acoustic in your honor tonight!
Debts that go unpaid follow a relatively predictable pattern.
When first missing a payment, the phone rings… a lot. After 30 days late your account is reported to credit reporting agencies (CRA’s) as such.
Next, the phone rings… a lot.
The pattern of the phone calls when you are 60, 90, 120 days late will often include offers of lower payment arrangements and hardship plans. Your credit report will continue to receive unsightly blemishes in 30 day intervals.
As you get nearer 180 days of nonpayment, some of the collection calls will take on a new tone. If you have not already thrown your phone out, changed your number, or continue to answer in your best disguised voice informing the caller that “um… that person does not live here”, you may get offers to settle the debt for less than what you owe.
At 180 days of delinquency (sometimes 210), something strange happens. Suddenly the background melody you became so accustomed to while watching television, or spending time with family, suddenly ceases. No more getting up to check the caller ID to see if you want to answer. No more checking messages for 10 minutes listening to “this call is for ____”, quickly followed by “message deleted”.
When you realize that the incessant phone calls have ceased seemingly overnight, you may even be compelled to dance a jig while singing “ding-dong, the witch is dead, the witch is dead” like scare crow traipsing down the yellow brick road in the Wizard of Oz.
Not so fast…. All that has happened is that your debt has been charged off and is in limbo while your creditor figures out which part of the collection pipe line they are dropping your account into.
Within a matter of days, or weeks, the monkey reappears and plants itself firmly on your back. He announces his presence daily, starting at 8 am and continuing through 9 pm. Riiiinnnggg… Riiiiinnnggg.
Your account has now been placed with a collection agency.
The pattern I present here typifies what will occur in the first 6 months of nonpayment with most credit card issuers. As you can see, there will be some opportunities.
For many people faced with the inability to pay their credit card bills on time, all the time, it can make sense to capitalize on these opportunities. You should look to optimize your success by:
Following an intelligent design that can be tailored to your specific set of financial circumstances.
Design a plan using information about what each of your specific creditors will do and when.
Be prepared to adjust. Your creditors may change their recovery policies requiring you to tweak your plan.
You can learn more about how “charge off” can be friend or foe by following the Debt Bytes continuing series on the topic: Click Here
If you would like to speak with someone who can assist you in determining what your next best step to getting out of debt may be: Click Here to schedule a Consultation. A CRN specialist can assist you in learning the details you will need to consider once they know more about you. Consults are provided at no cost.
The term “charge off” describes an accounting function followed by your lenders. When speaking of revolving consumer credit card accounts, a charge off occurs when the credit issuer either chooses, or must, recognize an unpaid loan balance as a loss.
For lenders, losses are bad news. The bad news gets reported and can affect anything from loan loss allowance/reserves, securitization, liquidity, even solvency.
Because of the bad news nature of a charge off, your credit card issuer will generally wait until the maximum time allowed to charge off your unpaid debt. The time frame for your creditor to recognize the loss on your unpaid credit card balance is outlined in Generally Accepted Accounting Principles (GAAP) and is typically 180 days of consecutive nonpayment, or what the Office of the Comptroller of the Currency (OCC) has designated as “seven zero billings”. There will be instances where charge off will seem to occur at 210 days of nonpayment.
Most lenders will wait as long as is allowable to take the charge off hit to their books, but they can take the hit earlier than 180-210 days. It’s just not a common practice.
What does this mean to you?
While charge off is an important accounting function for lenders, it is also a major event that applies to, and will affect, the efforts of a consumer who is experiencing financial difficulty.
While you are trying to navigate your inability to pay all of your debts and when evaluating the different debt relief options available to you, understanding the timing and affects of your accounts charging off will give you a needed advantage in your planning and timing.
The period leading up to, during, and after a charge off of your unsecured debts will impact:
Each one of the bullet items above are deserving of a separate article and will be posted on debt bytes as I complete them. If an above bullet is a click-able link, it will lead to coverage of that topic individually.
If you would like to speak with a pro for free to discuss your specific situation and what you may be able to do to deal with it, Click: Free Consultation Request. You will be contacted by a CRN specialist who can assist you in identifying your options and next best steps related to pre or post charge off debts.
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“I especially want to praise Paul for his expertise guidance he gave me during this whole process. In the beginning, I was very nervous and scared about doing this. I was especially worried about how this process would affect my credit score, but Paul explained everything to me in layman terms, which made it easier for me to understand."..."So, again, I humbly thank CRN and Paul very much for being there to help individuals like me, who feel like they are drowning in debt and have no one to turn to.”
