What happens when your unpaid credit card debt is charged off?
Summary
When you do not pay your credit card debt for a long time, the creditor may mark the debt as "charged off." This does not erase the debt—you still owe it, and the lender or a new collection agency can try to collect the money. A charge-off damages your credit score and can stay on your credit report for seven years.Key Facts
- A charge-off means the lender writes the debt as a loss in their books but you still owe all the money, including interest and fees.
- Your credit score will drop significantly after a charge-off and the mark stays on your credit report for seven years.
- Credit card companies often sell charged-off debts to debt collection agencies for less than the full amount.
- Debt collectors will try to get you to pay and may contact you by phone or mail.
- Creditors or collectors can sue you to recover the debt, and if they win, they can take money from your wages or bank account.
- Interest usually keeps building up on the unpaid balance even after a charge-off.
- Debt settlement is one common option to handle charged-off debts where you might pay less than the full amount owed.
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