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5:00Debt Collection & Charge-Offs: The Afterlife of an Unpaid Loan
Stop paying your card and after six months the bank declares the debt a loss, then sells it for four cents on the dollar. The debt does not die. It just changes owners, and the people chasing it paid almost nothing for the right to chase you.
A charge-off sounds like forgiveness. It is the opposite. When a revolving account like a credit card goes 180 days past due, US bank regulators (the FFIEC's *Uniform Retail Credit Classification* policy) require the lender to write it off as a loss, moving it off the balance sheet as an asset. For closed-end instalment loans the deadline is 120 days. The charge-off is an *accounting* event for the bank's books and its tax return. It does nothing to cancel what you owe; the debt survives the funeral.
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