I have a cleint with a Amex charge with a dla of 9/12. The charge off account is not having to much of an affect on his credit score due to the fact that its over six years old.
My problem is that the charge off is still showing terms of a minimum payment due every month. This is effecting my cleints debt to income ratio.
Any idea why it is this way? Do charge off account still have a minimum payment due?
A chareg-off does not discharge the debt, and the creditor can continue to bill and attempt collection as normal provided they have not sold the debt.
It is an internal accounting measure that does not prevent the creditor from continued billing.
It is not just the monthly min billing that affects util and debt to income, it is the entire delinquent debt.
Perhaps the OP is referring to a mortgage app. In that case only the min payment is used for debt to income.
and also only if it is due monthly. Charge offs are not due monthly
Charge Off does not remove the debt. Certain states such as North Carolina require creditors to charge their stuff off after so many month's they are behind. Its not really a good thing to have ,and typically if you negotiate with them they can change the remarks, and remove the payments. Ask them for a PAID IN FULL Settlement offer.
Se excuse my ignorance here, but what is a charge off?
Very good question. The only reason I know anything about this is because I helped an individual help remove the impact of this. I thought it was a closed account at first.
Apparently its a responsiblity thing for the credit card company. Like say you have a Secured Card through you're local bank, and you have $200 limit, and charge $500, and never pay it back or breach the terms. They will close the card.
I am assuming its something to do with it being late. They will not change the Charge Off, But will report a zero dollar balance, and thats typically what a creditor would like.
I see, thanks for the explanation.
A charge-off is an internal accounting measure that is taken by creditors, and often required by federal regulation, that moves a delinquent debt from the receivable assets column of their accounting books over into a "bad debt" column that is not included as an asset.
The intent of requiring creditors to charge-off unreceived assets that have reached the stage of delinquency where they are no longer reasonably expected to be paid by the consumer is to protect shareholders and potential investors from overstatement by creditors of their "real" assets. Carrying a high amount of accounts receivable assets that remain unpaid, and are not reasonably expected to be paid, can decieve others as to the real value of the creditor, and is a measure intended to protect the public from financial mistatements.
Federal regulations require large creditors and lending institutions to normally charge delinquenct installment loans for profit and loss once they reach 120 days late, and revolving accounts, including credit cards, at 180-days late.
Taking of a charge-of does not discharge any of the debt, and the consumer remains liable for the entire amount, and the creditor or their assigns or heirs can continue to attempt to collect the entire amount.
Unpaid, charged-off debt can be deducted by creditors from their assets when filing income taxes, and thus offer a tax writeoff benefit.