Charge Off, Now being sued

[antgavjoc]

My question is I have a Charge  off from World's Foremost bank. The OC sent me a letter that the debt was being Charged off. This week I was served and I am now being Sued by them. The debt was never sent to collections. I thought that the charge off meant that the OC was taking the hit and writing it off as a bad debt that was un-collectable. The communication that I was served with states that I have x amount of days to respond before a Judgement is granted.  Any advice on how to proceed? Any information would be helpful. Thank you.

[RobertEG]

Taking of a charge-off is an internal accounting measure taken by creditors.

It does NOT mean that the debt is no longer owed to or can be collected by the creditor.  The debt remains fully collectible.

The term "uncollectible" does not mean that it can no longer be collected by the creditor.

It means that the debt has reached a state of delinquency such that it is no longer reasonably expected to be paid.

Debt is shown in a creditor's books as a receivable asset until it is paid by the consumer.

If a creditor is carrying a high amount of unpaid debt, their accounts receivable will be high.  If debt is not likely to be paid, the creditor's stated assets are not realistic.

To protect shareholders and potential investors from such an inflated statement of assets, regs require creditors to remove debts from their statement of receivable assets once they reach standards that define the debt has not likely to be paid (in accounting lingo, "uncollectible").

The creditor is then requried to shift the debt in their accounting books from a receivable asset to a column that shows it as unlikely to be paid ("bad debt").

That then produces a more realistic view of the creditor's "real" assets.

The bad debt that has been charged-off remains fully collectible by the creditor, and they can still continue to attempt to collect the full debt by normal means, including referral to a debt collector or filing a civil suit to obtain a court-ordered judgment for payment of the debt.

It is perfectly proper of a creditor to file a civil action seeking a judgment on a debt after it has been charged-off.

Of course, as with any other debt, the state statute of limitations may prevent a judgment if the civil action is not filed within the period under the state SOL statute.

[Cherekas]

Similar situation happened to me with discover. It was charged off and then I received info from a law office to respond. I didnt (dumb decision), then they were awarded default judgement. This happened in 2015, literally 6 mos after it was charged off. I just paid it  April this year and the judgement was removed due to the new credit laws. I wouldnt do what i did previously, i should've responded and tried to negotiate payment and no judgement to my report. Good luck, judgment sucks!!