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When an unpaid debt is sold to a debt collector, the creditor must report a $0 balance

Creditors that charge-off accounts and sell them to debt collectors must update balance to $0. If the unpaid debt is assigned to a debt collector, the creditor and debt collector can both report the unpaid balance.

Question: I had an Amazon card with Chase way back in 2011-2013. In 2013 my husband got laid off right after our second child was born. Our first had special needs and his medical needs obviously came first. The account went delinquent and was charged off in late 2014. I assumed they had sold it to a collection agency and figured I’d deal with it when I was contacted by them. Years have gone by and I never received communication from either Chase or a collection agency so I simply forgot about it.

Now that we are starting to get our credit in order to apply for a mortgage I pulled our reports and see that Chase is still reporting a balance of $649 but it is listed as closed and charged off. I have a couple questions before I call them to get this worked out.

The first one is two parts: if they sold it to a debt buyer so they have to report the balance as zero? And if they assigned it to a collection agency can they report it as $649 until it is paid?

My second question is, if they didn’t sell or assign it did they still write it off as lost money? If so would I have a chance to settle it for less and use a PTD instead of trying to come up with the money up front or setting up some kind of payment agreement. I don’t want to poke a sleeping bear so I’d like to know what I am in for before I remind them it’s still there. Thanks for any help or insight you can provide.

Response: If Chase sells the debt, they are required to promptly update the balance to $0 on your credit reports. If Chase owns the debt but assigns collection authority to a debt collector, Chase along with the assigned debt collector can report the amount $649 unpaid debt on your credit reports.


If the debt is subsequently paid, both the Chase and the debt collector must update the balance to $0.

A charge-off is an internal accounting measure that permits Chase to move the debt from the accounts receivable (i.e., asset) column of their accounting ledger over to a bad-debt column that’s no longer a legal asset.

A paid in full or settled notation on the charge-off will result in the balance updated to $0. The zero balance will cease any future updates to your credit reports plus, paying the account to zero may result in a change to your credit utilization. Typically, the less utilization the higher your credit scores.

Chase is not known to accept pay for delete offers. I’m not saying don’t try, it’s just hit or miss with this one. Chase will however, more than likely work with you on settling the account for less than owed.

You may want to consider qualifying for a FHA Mortgage Loan. FHA guidelines do not require charge-off accounts be paid. The problem comes when FHA-Approved Lenders have their own qualifications (overlay) in addition to FHA requirements.

Not all lenders have the same FHA requirements.  One lender may require borrowers to pay charge-offs and another lender may not. However, the 2018 FHA Charge Off Guidelines state definitely that a borrower does not need to pay off or settle a charge off account to qualify for FHA Home Loans.

Good luck to you!

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