cancel
Showing results for 
Search instead for 
Did you mean: 

Charged off but making payments. Need satisfaction letter.

tag
Anonymous
Not applicable

Charged off but making payments. Need satisfaction letter.

 I am trying to get approved for a home loan and this charge off is causing an underwriting problem.  This particular Bank is very difficult to deal with. I ask them if they could give me a letter showing that I am current on an account of 158,000 since we settled at 78,000 and we make payments to them for 323.00 a month. The bank does not show that, so my husband and I decided there is no point in making any more payments to them since they are leaving it as a charge off.  Bank told me if we stop paying they will turn it over to collections. They might as well send it to collections. What are your thoughts? The 78,000 is not recorded so how could collections record it because it was already charged off.  Please advise.

Message 1 of 4
3 REPLIES 3
RobertEG
Legendary Contributor

Re: Charged off but making payments. Need satisfaction letter.

Two thoughts..

1. I agree with your bank for the most part, but in my opinion they do have one obligation that they apparently have not updated.... current balance on the debt.

2. Stopping payments may result not only in a collection, but legal action for default on contract if you have a written payment agreement with the creditor

 

 A charge-of was a one-time, internal bookeeping measure they took.  It was based upon two factors on their part: (1) the debt was delinquent, and (2) the delinquency had reached the point, usually 120 days, where they concluded that the debt had most likely become "uncollectible."  It does NOT "charge-off" the debt between the creditor and the consumer.  It charges off the debt internally in the creditors accounting register, moving it from a receivable asset to an uncollectible bad debt.

The entire amount is still owed, and they or their assigns/heirs can continue actions to collection the entire amount.

 

CRAs permit reporting of a charge-off to your credit file.  Acts subsequent to the fact of their internal business action, such as any partial of full payment of the debt, do not in any way alter the fact of their prior business decision at that prior point in time.  The charge-off properly remains as a statement of that fact, regardless of subsequent actions on the account.

 

When they reported the charge-off, they report the amount of debt at time of the CO.  However, should the consumer pay down the debt, as apparently is being done under your payment agreement, they should be updating the debt balance remaining.  The only inaccuracy I see is possibly a failure to timely report an update on the current balance of the delinquent debt.  Disputable, but easily correctible on their part.

 

Reducing the balance owed, however, does not mean the account is current.  It is not current until the delinquent debt becomes $0.  Thus, they are correct in decliing to provide a statement that the account is "current."

 

The entire debt is still legally collectible.  I would heed their warning as such.

 

 

 

Message 2 of 4
llecs
Moderator Emeritus

Re: Charged off but making payments. Need satisfaction letter.

If I had that, I would continue to make the payments. Depending on your state, if you stop making the payments they can sue you for the full $150k because it would be a breach of contract. The reported payments should be the original mortgage amount, and not the $323 amount. If your new lender is making a fuss, maybe show them your settlement letter w/ this particular company? They probably want to know that it has been paid off vs. making payments on it. 

 

As far as the charge-off comment goes on your CR, the step that should have been taken is a PFD letter. In essence, it says that you'll agree to pay $x in exchange for a deletion, and that if they agree to that, they are to respond in writing. Once it is paid off, then they'll delete. It really is for the one-payment plan as opposed to monthly installments. There's no incentive to delete the bad references before it's paid.

Message 3 of 4
AndySoCal
Valued Contributor

Re: Charged off but making payments. Need satisfaction letter.

The account should be reporting as a chargeo off or Charge off now paying with a comment something to effect  of making payment(s) after charge off . The balnce should be the amount you owe.

FICO Scores XPN v8 802 V2 831 (SDFCU) TUC 803 v8 EFX 807 (10/2023)
Discover 09/90 19,000, JCPenney 10/2008 4,700 US Bank Cash+ 12,000 Citibank Custom Cash 5/2015 11,100 C State Dept. FCU 15,000 06/2023 , 02/2024 Redstone FCU Signature VISA 10,000 Banking: Ally Bank Credit Unions: Lafayette FCU Quorum FCU State Department FCU State Department FCU Pelican State CU Redstone FCU

Message 4 of 4
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.