A lot of people aren’t sure what it means when credit card debt is “charged off.” First, this only happens when you are seriously behind on your payments. By federal law this is 180 days after your last minimum payment – that is almost half of a year. When this happens, it means that the credit card company is writing off the debt as uncollectible, but this doesn’t get you off the hook unless the Florida statute of limitations has expired. Until that time, even though the bank has declared the debt uncollectible, that may not stop them from turning it over to a collections agency. Typically, the bank will sell the debt to the agency who will then own the debt and have the legal authority to collect.

Needless to say, this is going to hurt your credit score very seriously. Having an account charged-off can stay on your record for as long as a bankruptcy – a period of seven years. However, a bankruptcy is a one-time event, whereas records of missed and late payments that resulted in the charge-off are going to kneecap your credit score for years to come. You can pay off the debt in full, which will result in a better score than settling for less than the full balance. It’s better to pay it late and pay it in full than to never pay it off at all. The black mark will still be there, but by paying it off, you are lessening the impact that black mark will have further down the road.

WHAT SHOULD I DO IF MY CREDIT CARD DEBT IS CHARGED OFF?

If you are looking at a charge-off and are having trouble paying your other bills or even your daily living expenses, it’s time to get some financial counseling and decide on a way forward. If your financial problems are due to such major life changes as a layoff, divorce, or death of a spouse, you may be able to speak to your creditor and explain your circumstances with a goodwill letter. You may be able to set up a debt management plan and get your finances in order, or you may need to file for bankruptcy. These are major life changes that you will need to seriously consider, and with appropriate legal and financial advice.

For a time, no matter what changes you decide to make, you will need to contemplate life with limited or no credit on tap. It can be tempting to fall into subprime credit cards, payday loans, or other debt traps, but it is inadvisable as these products come with hidden fees and high interest rates, that instead of helping you, will hurt you in the long run. It is possible to live without credit cards. It may be more difficult in this day and age, but it is certainly possible. Our office offers free consultations to help you get back on your feet and out from under the weight of debt that is dragging you down. Call our West Palm Beach or Fort Lauderdale offices to set one up today.