Debt / reporting / regulations allowed?

[aot2009]

I have a friend I am helping with his report and he has one thing that is a ultility bill from national gridus.

He had been paying a set amount on the debt for years and then he moved away where they don't have this utility company anymore.

He setup auto bill pay to continue to pay them and they are cashing the amounts.

His report shows this month it went on as being charged off, no letter from the company or anything trying to collect it.

Do they have the right to do that, nothing in the original payment agreement says anything that they will expect full amount if they move or no longer have an account through that company?

[llecs]

Maybe. Maybe not. IMO, they can do that. Let's take a car note for example. If you have a large note and wreck the car totalling it, then you typically have one month to pay off the entire balance whether it be through insurance or gap insurance. If there's a balance owed and you don't pay in the month they'll typically charge it off even if you're on a payment schedule. Likewise with a utility, payment in full was expected a long time ago. Making payments on it doesn't change the fact that it was due in full a while back. Now if he got a payment agreement in writing saying the utility won't mark him late, then my answer would be different.

[aot2009]

Right but I would think they would at least send a letter or something requesting the full amount is due, because of the payment agreement the full amount was not due. 

He called and they have been applying his payment to the wrong account as well. They admit that was a mistake but refuse to do anything at this point.

[llecs]

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@aot2009 wrote:

He called and they have been applying his payment to the wrong account as well. They admit that was a mistake but refuse to do anything at this point.

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IMO, he can challenge the reporting based on this alone. For best results, he'll need to get something in writing from them indicating that. Then he can try disputing it with that letter indicating they applied the wrong acct. I'd definitely try the GW route first before burning that bridge.

[RobertEG]

The issue, as I see it, is whether they met the conditions for charging-off a debt.

Two things are required in order for a creditor to move a receivable asset from accounts receivable (cash they expect to receive, and thus taxable income) over in their accounting ledger to a business loss (and thus a write-off).

First, the debt must obviously have been delinquent at time of their accounting action.

Second, they must have reasonable basis for also concluding that the conosumer is not likely to pay the debt.  In accounting lingo, they must have basis for concluding that the debt has become "uncollectible."  Many statutes and regs define when a debt may be charged-off, and some even compel a business to charge-off the debt at a certain period.  The underlying reason why the tax code provides creditors a financial benefit for charging-off bad debts is to prevent businesses from overstating their likely receivable assets, and thus overstating the worth of their business.

With all that said, if a creditor is actually accepting ongoing payments on a delinquent debt, I see no basis for a reasonable interpretation that the consumer is unlikely to pay the debt.  The consumer is proving just the opposite on an ongoing basis.  Thus, I would see a challenge of their determination that the debt has become "uncollectible."  The IRS does not hand out $$ on debt being paid.

I would suggest consulting an attorney versed in accounting law.

[aot2009]

Thanks this is what I was looking for.

>>Many statutes and regs define when a debt may be charged-off, and some even compel a business to charge-off the debt at a certain period. 

This is the part in question where he has proof that this debt was not behind in anyway according the original payment agreement. Do you know the statutes for MA state for charge off?

[RobertEG]

I would recommend an initial consulttion with an atty in your state.

They know the wrinkles in your jurisdiction, which might also depend upon any case law on the issue that interprets the statutes and regs.

Determinations as to uncollectibility of debt are by nature subjective, so would most likely depend upon the specifics of your case.

Not something upon which I would rely on a forum such as this for legal basis.

[aot2009]

agreed I'll have him check with an attorney.

[aot2009]

He called an attorney who was considered well versed in debt collection laws. It didn't go so well the attorney told him to pay the debt in full and then dispute the debt with the CRA's as paid. I'm shocked that lawyers get paid as much as they do.