Mega Contributor
Posts: 18,418
Registered: ‎03-19-2007
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.