Can A Company Report a Charge-off After Filing Bankruptcy?
If you have filed for bankruptcy, your creditors such as credit card companies may not report the debt you owe them as a charge-off. It must have a different designation. Although laws vary somewhat by state, there are federal laws that govern the designation of charged-off debt.
In this Low Cost Legal guide to bankruptcy will help you understand this sometimes confusing area of charge-offs.
What is a Charge-Off of Debt?
Charged-off debt is debt that a bank, credit card company, hospital or other entity believes will not be paid back. A credit card company can charge off debt once it is 6 months delinquent. In most states, car loans can be charged off after 4 months of non-payment.
Even though the debt has been charged off, you still owe the debt. It has not been forgiven. The company that owns the debt might continue to attempt to collect it through its own collection department or through attorneys, or it might sell the debt to debt collection specialists. The point is, however, that you still owe the debt.
What is Discharged Debt?
When you go through a successful bankruptcy, all debts that you are not required to pay back are discharged at the end of the bankruptcy. Discharged means that you do not have to pay the debts back. They are now history and the companies owed have no recourse to go after you. The debt is erased from the books, though the discharge will continue to appear on your credit report for 7-10 years.
The fact is, having charged off debt on your credit report is worse than having discharged debt on your credit report since charged off debt is debt you are still liable for.
Protecting Yourself Against Charge Offs After Bankruptcy
The first thing to do is to discuss your financial situation with a qualified bankruptcy attorney. If you are a low-income person, you might be able to find low-cost bankruptcy attorneys that will help you through your situation.
Once the bankruptcy lawyer has successfully guided you through bankruptcy, all charged off debt should be converted to discharged debt on your credit report. The 3 credit reporting companies, Experian, Equifax and Trans Union are required to make that change.
Most low cost bankruptcy attorneys recommend that you pull your credit report 6-8 months after your bankruptcy is discharged. If debt still appears on your report as charged off debt, contact the 3 reporting agencies by phone or in writing to notify them of the error. Fax or send them a copy of your bankruptcy discharge if they question the validity of your claim. By law, they are required to convert all charge offs to discharged debt once your bankruptcy is discharged. If they do not, then have your bankruptcy lawyer write or contact them. That usually takes care of the issue.