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Charged-off account does not mean the debt is no longer owed

Creditors may write-off seriously delinquent accounts in the form of a charge-off but that does not mean you are free and clear from paying the debt.
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charge-off-does-not-mean-you-no-longer-owe-the-debt

A Charged-off account does not mean the debt is no longer owed (unless you file for bankruptcy). Creditors still retain the right to collect the full amount of debt either through internal collections, lawsuit, sell or transfer to debt collector. Once the statute of limitations has run, you cannot be legally made to pay the debt. Plus, after 7 years, the debt can no longer appear on your credit reports.

QUESTION: Thank you so much for the clarification. The debt shows charged off/wrote off profit/loss. It was sold to a debt collector but I got them removed months ago and just randomly the main creditor reopened it as charged off. Can I dispute the open status on the charge off?

ANSWER: It may be that the creditor still owns the debt. The debt may have been assigned or transferred to the collection agency, not sold. If so, the original creditor can change the charge-off status from closed to open. Creditors are allowed to report and update every month until the charge-off is deleted due to the exclusion date or if you pay the debt.

What I suspect is occurring is that you are actively engaged in repairing your credit and your scores are increasing. One of the unintended consequences of rebuilding your credit is that when your scores and history start to look better, old creditors and even collection agencies get alerted by the credit bureaus.


As your scores get better, an original creditor and debt collector can get alerted that your credit profile is improving, signaling that you are now able to pay an old debt. FICO produces several score models not available to the consumer. One such score model is the FICO® Collection Score that provides creditors and collectors a report on how consumers repay credit obligations and whether a consumer with prior credit blemishes is seeking new credit.

It is quite possible that your efforts in rebuilding your credit triggered the creditor to change the charge-off status from closed to open in an attempt to get you to pay. Your better credit habits can make you a target. You can be going along just fine and boom! A creditor updates a charge-off that has not been updated for years and your credit scores take a dive. It’s purposefully done to try to get you to pay. While I’m not saying you can’t dispute the charge-off status; or, some inaccuracy within the negative listing, the creditor is within their legal right to change the status from closed to open.

Homebuyers shopping for a mortgage may also unknowingly trigger the FICO® Collection Score model just by applying for a mortgage loan. The credit bureaus will notify creditors and debt collectors because they know a change in credit score during the mortgage process can be catastrophic. Most consumers will do whatever needs to be done to pay a debt in order to complete the mortgage loan process.

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