Question about credit report

[yomama]

We've viewed our credit report online and we've seen that mostly all of our credit card accounts say "Charged off". Exactly what does that mean? I assume that the one (at least I think there's only one) that says "Collection" or something like that was turned over to a collection agency. That must be the one that called here. We never answer our phone and let the machine pick up. The guy left his name and phone number and didn't say what he wanted. I looked up the phone number online and found out that it's a collection agency. Does "charged off" mean that those credit card companies have already given us up for lost?

[HHM]

Charged off means the creditor has taken your non-payment of your balance due as a loss, from the creditors point of view, charged off is an accounting entry. (this is done mostly for tax purposes and for SEC purposes if the creditor is a publicly traded company). NOW, this DOES NOT MEAN you are not legally obligated to pay the debt (you still are obligated), but it does mean that the creditor is placing your account with collections or shopping it to secondary junk debt buyers.

Charged off is probably the worst credit entry you can have on your report.

[yomama]

I guess I'm having trouble understanding why a company would want to buy another company's debts. I feel like my husband and I did the best we could and when we realized we were in trouble last year, instead of running to bankruptcy court right away, we wanted to try working it out somehow and having a debt negotiation company negotiate with our creditors to get the amounts down to something we could afford to pay. We felt that at least that way they could get part of what we owed them, but our finances plummeted in the coming months and we were unable to continue putting money into our trust account the company had set up for us. I guess it's not like we could have convinced the credit card companies to not charge them off. I think that was more or less out of our hands, so even if "charged off" is the worst credit entry we could have on our report, I feel like we did the best we could do with what we had to work with moneywise. I guess it's sort of like my husband said awhile ago, "Charged off, collections, what's the difference...we're going bankrupt and that's not exactly going to make either of us look good no matter how it's worded. Bankrupt is bankrupt." We had good intentions of paying and hopefully that will at least count for something. I hear lots of people on here say to leave as much time in between the last charge and filing as possible. With the exception of one charge for gas that my husband made (and that wasn't even on any of the cards we're including in the bankruptcy), we haven't charged on our cards in over a year. For a year we haven't paid on any of the cards that we'd like to have discharged, ever since we contacted the debt negotiating company. I don't know at what point the companies decide to make them collections and at what point they call them charge offs, and if charge offs are the worst thing that we can have (and most of them are just that), then that's just the way it is. We can't change anything now except hope that the amounts are discharged so we can get a fresh start. We've learned a big lesson and have cut up all our charge cards but one and that's only to be used in emergencies. We don't want to get in this predicament again. I've never worried so much in my life as I have this past year.

[poorme]

As HHM said, the creditor charged off your debt to them as a business loss. Tax write-off. Since you still legally owe the debt, they chose to 'sell' the debt at a write down since it has value, they get something - say 30 cents on the dollar. It's cheaper to do this than to keep spending money trying to collect - let someone else do that now. So the collection agency who bought your $1,000 debt for $300 now has an upside potential profit of $700. And the calls & letters start flooding in.....

[yomama]

Yes, we're getting both of them, calls and letters. I just hope that nobody actually shows up on a person's doorstep. They have to stop all of this activity once we file though, right?

[SinkingFast]

Yep! When you file BK, and Automatic Stay goes in place preventing the Creditors from contacting you regarding your debts, payments, and such.

Be sure to give your attny copies of your Credit Reports, old CC statements, and any letters you may have received from your Creditors and Collections Agencies. There may be addresses in your CR's or on those letters that your attny can include on your Creditors Matrix. That way as many of your Creditor's CA's will be notified as possible when you file.

If you get phone calls after you file, feel free to answer the phone. All you have to do is give Creditors and Collectors your attny's name, phone #, your BK case filing #, and what Chapter of BK you filed. If they try to talk beyond that, just hang up.

[yomama]

SinkingFast, Thanks again for your most welcome advice and comments. I don't know how you learned so much, but you know loads more than I do. I'm so glad I found this forum! It's making all the differnce in my husband and I feeling confident that we've made the right decision in filing.

[yomama]

I just got around to looking at our credit report again. Five of the accounts say "Charge-Off" under the account status and one says "Collection Account". We have lots of cards that say "Pays As Agreed". Those are the ones that we don't owe on and have closed out. Probably about 30 of them. We kept transferring balances to lower percentage cards...and still couldn't manage eventually. I don't understand one of these cards on the report, CBUSASEARS. It says nothing is owed on it and I'm guessing is one that we closed out either in the past or just recently. What I don't understand is that it says it's a charge-off! How can that be if it's one we don't even owe anything on? Can that be because one of our cards is a Sears card, just not that one?