If a Credit Card Company Charges Off a Debt Can They Still Sue You? I Was a Victim of CMS and Brad Daley. – Jay

“Dear Steve,

I also was a victim of CMS and Brad Daley. I was sued and got a judgment against me from B/A.

My question is, If a credit card company writes the debt off, can an attorney still sue you? Looks like if the debt was written off the IRS would write off the total for the cc company and they’re would be no debt owed.

Now I have another attorney in another state sending me letters that I did answer that I disputed.

Thank you

Jay”

The Answer:

Dear Jay,

I know, it’s totally crazy but a debt must be charged off in accordance with the rules put forward by the Office of the Comptroller of the Currency. A charged off debt is reported to the IRS and you owe taxes on the forgiven debt. But the debt is actually not forgiven nor not collectible.

A charge off is an accounting function and does not mean the debt is still not legally collectible. The original creditor or a new creditor that buys the debt may sue you to enforce the debt contract and to collect the debt.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

If a Credit Card Company Charges Off a Debt Can They Still Sue You? I Was a Victim of CMS and Brad Daley. Jay cms charged off charge off brad daley charge off ask the get out of debt expert ask the get out of debt expert
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  • Steve Rhode

    Justin,

    LMAO, harken my tweets.

    Actually….a debt is not forgiven when the statute of limitations expires. The only things that happens as of that date is a creditors can’t sue you for the debt, but they can pursue you till the end of time. Most people are unaware of that.

    Steve

  • Merovingian TV

    Great Stuff Steve, re: the 2nd mortgage question. I find it interesting that if the lender of the 2nd mortgage see’s forcing a foreclosure on the property as a secure plan of recourse they do so within 90 days and don’t classify the debt as bad or charged off. So you’re sitting on a lame duck house & your 2nd mortgage is in like Vegas or Orlando (super inflated) and there’s no equity in it, you’ll know for sure within 90-120 days if you don’t see any legal work at your door & finally for sure after the 180 day inspection. Would the statute of limitations for Home Equity loans be the same as credit cards per state?

    I just wish the bulletin would have shed some light on if there is a classification for actual forgiven debt. I know back before the collection agencies ruled the world debt was actually forgiven and you’d have to report it as income, but collection agencies wouldn’t try and collect the way the do now.
    I guess my question is obsolete as well then.

    I’m lead to believe the only “forgiveness” is when the statute of limitations expire. Even then Collectors can call you, that’s the only reason to pay it or partially pay it, (notice I didn’t say settle) since by definition settle means settling outside of court.

    Thanks Steve, I harken your tweets, replies and updates.

    Justin

  • Steve Rhode

    Justin,

    Here are some excerpts from OCC Bulletin 2000-20 which covers this subject.

    “The 1980 policy established uniform guidelines for the classification of retail Date: June 20, 2000 installment credit based on delinquency status and provided charge-off time frames for open-end and closed-end credit.”

    In general, the Uniform Policy:
    Ö¾ Established a charge-off policy for open-end credit at 180 days delinquency and closed-end credit at 120 days delinquency.
    Ö¾ Provided guidance for loans affected by bankruptcy, fraud, and death.
    Ö¾ Established guidelines for re-aging, extending, deferring, or rewriting past due accounts.
    Ö¾ Provided for classification of certain delinquent residential mortgage and home equity loans.
    Ö¾ Provided an alternative method of recognizing partial payments.

    Actual credit losses on individual retail credits should be recorded when the institution becomes aware of the loss, but in no case should the charge-off exceed the time frames stated in this policy.

    Closed-end retail loans that become past due 120 cumulative days and open-end retail loans that become past due 180 cumulative days from the contractual due date should be classified Loss and charged off.

    Institutions should use one of two methods to recognize partial payments. A payment equivalent to 90 percent or more of the contractual payment may be considered a full payment in computing past due status. Alternatively, the institution may aggregate payments and give credit for any partial payment received. For example, if a regular installment payment is $300 and the borrower makes payments of only $150 per month for a six-month period, the loan would be $900 ($150 shortage times six payments), or three full months past due.

    —

    The OCC does not do anything with the debt but require the bank to properly classify its loan performance. This all harkens (a word I need to use more) back to the S&L crash of the 1980s. After that regulators wanted to see better reporting of assets on the books.

    A charge off is simply a debt which can not be shown on the books as good asset. A debt can be charged off and help if the bank wants to but most just package them and sell them in bulk just to move the “crap” stuff on their books.

    Steve

  • Merovingian TV

    Steve,

    Brilliant explanation.
    However I’ve been unsuccessfully looking on the OCC’s website for clarification of that rule.
    Can you throw me a link?

    What is the debt called after the OCC officially forgives it? “Forgiven,” “Discharged,” Charged off for Real”???

    As if this ever happens anymore for credit cards.
    Second mortgages post foreclosure & eviction seem more likely that the OCC might eventually decide classification, because the likely-hood of collecting isn’t high & no collection entity wants to spend on suit nor does the debtor want to do discharge debt through BK.

    On credit reports it says “Charged off” after 180 days generally.
    What would the status say after the Office of the Comptroller of the Currency officially classifies the debt as non-collect-able?

    How does one petition or begin that process? Any light you can shed?

    Regards,
    Justin

  • http://twitter.com/MerovingianTV Merovingian TV

    Steve,

    Brilliant explanation.
    However I’ve been unsuccessfully looking on the OCC’s website for clarification of that rule.
    Can you throw me a link?

    What is the debt called after the OCC officially forgives it? “Forgiven,” “Discharged,” Charged off for Real”???

    As if this ever happens anymore for credit cards.
    Second mortgages post foreclosure & eviction seem more likely that the OCC might eventually decide classification, because the likely-hood of collecting isn’t high & no collection entity wants to spend on suit nor does the debtor want to do discharge debt through BK.

    On credit reports it says “Charged off” after 180 days generally.
    What would the status say after the Office of the Comptroller of the Currency officially classifies the debt as non-collect-able?

    How does one petition or begin that process? Any light you can shed?

    Regards,
    Justin

    • http://GetOutOfDebt.org Steve Rhode

      Justin,

      Here are some excerpts from OCC Bulletin 2000-20 which covers this subject.

      “The 1980 policy established uniform guidelines for the classification of retail Date: June 20, 2000 installment credit based on delinquency status and provided charge-off time frames for open-end and closed-end credit.”

      In general, the Uniform Policy:
      ־ Established a charge-off policy for open-end credit at 180 days delinquency and closed-end credit at 120 days delinquency.
      ־ Provided guidance for loans affected by bankruptcy, fraud, and death.
      ־ Established guidelines for re-aging, extending, deferring, or rewriting past due accounts.
      ־ Provided for classification of certain delinquent residential mortgage and home equity loans.
      ־ Provided an alternative method of recognizing partial payments.

      Actual credit losses on individual retail credits should be recorded when the institution becomes aware of the loss, but in no case should the charge-off exceed the time frames stated in this policy.

      Closed-end retail loans that become past due 120 cumulative days and open-end retail loans that become past due 180 cumulative days from the contractual due date should be classified Loss and charged off.

      Institutions should use one of two methods to recognize partial payments. A payment equivalent to 90 percent or more of the contractual payment may be considered a full payment in computing past due status. Alternatively, the institution may aggregate payments and give credit for any partial payment received. For example, if a regular installment payment is $300 and the borrower makes payments of only $150 per month for a six-month period, the loan would be $900 ($150 shortage times six payments), or three full months past due.

      —

      The OCC does not do anything with the debt but require the bank to properly classify its loan performance. This all harkens (a word I need to use more) back to the S&L crash of the 1980s. After that regulators wanted to see better reporting of assets on the books.

      A charge off is simply a debt which can not be shown on the books as good asset. A debt can be charged off and help if the bank wants to but most just package them and sell them in bulk just to move the “crap” stuff on their books.

      Steve

      • http://twitter.com/MerovingianTV Merovingian TV

        Great Stuff Steve, re: the 2nd mortgage question. I find it interesting that if the lender of the 2nd mortgage see’s forcing a foreclosure on the property as a secure plan of recourse they do so within 90 days and don’t classify the debt as bad or charged off. So you’re sitting on a lame duck house & your 2nd mortgage is in like Vegas or Orlando (super inflated) and there’s no equity in it, you’ll know for sure within 90-120 days if you don’t see any legal work at your door & finally for sure after the 180 day inspection. Would the statute of limitations for Home Equity loans be the same as credit cards per state?

        I just wish the bulletin would have shed some light on if there is a classification for actual forgiven debt. I know back before the collection agencies ruled the world debt was actually forgiven and you’d have to report it as income, but collection agencies wouldn’t try and collect the way the do now.
        I guess my question is obsolete as well then.

        I’m lead to believe the only “forgiveness” is when the statute of limitations expire. Even then Collectors can call you, that’s the only reason to pay it or partially pay it, (notice I didn’t say settle) since by definition settle means settling outside of court.

        Thanks Steve, I harken your tweets, replies and updates.

        Justin

      • http://GetOutOfDebt.org Steve Rhode

        Justin,

        LMAO, harken my tweets.

        Actually….a debt is not forgiven when the statute of limitations expires. The only things that happens as of that date is a creditors can’t sue you for the debt, but they can pursue you till the end of time. Most people are unaware of that.

        Steve

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