Charge-Off
Also known as: charged off, write-off
An accounting action by a lender to remove a severely delinquent debt (typically 120-180 days past due) from its books as an asset. A charge-off does not mean the debt is forgiven - you still owe it. The lender typically sells the charged-off debt to a collection agency, which then pursues collection independently.
Full definition
A charge-off is a creditor's internal accounting decision, not a legal event affecting your obligation. When a lender charges off a debt, it takes a loss on its financial statements and reclassifies the loan from 'asset' to 'loss.' Banks are required by federal banking regulators to charge off severely delinquent consumer loans at 120-180 days past due. Key distinction: A charge-off does NOT forgive the debt. Despite the lender writing off the balance, you remain legally obligated to pay the full amount. The charge-off simply means the original lender has stopped expecting payment and has taken its tax and accounting write-off. What happens after a charge-off: Debt sale: in the majority of cases, the original lender sells the charged-off debt to a debt buyer (collection agency) at 1%-10% of face value. The collection agency acquires the right to collect the full amount. Collection activity: the debt buyer (or a third-party collection agency working for the buyer) will contact you seeking payment. New collection accounts may appear on your credit report. Time limits: debts have a statute of limitations - a time limit on how long a creditor can sue to collect the debt. After the statute runs (3-10 years depending on state and debt type), the debt is 'time-barred.' However, the charge-off remains on your credit report for 7 years from the date of first delinquency, regardless of whether the statute of limitations has passed. Credit report impact: A charge-off is one of the most damaging credit events. It can reduce your credit score by 100-150 points. It remains on your credit report for 7 years from the original delinquency date (not 7 years from the charge-off date). Even after paying a charged-off debt, the item typically remains on your report as 'paid charge-off' - damaging, but less so than unpaid.
- Written by
- Get Advance Loan Editorial Team
- Reviewed by
- Compliance Review
- Published
- January 15, 2026
- Last reviewed
- June 15, 2026
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