A common misconception people have regards charge-offs on their credit reports. Many people think that if a credit card company or other creditor “charges off” the debt, that it means they no longer owe the money, or they will no longer try to collect on that debt. This is simply not correct.
A charge-off is merely a bookkeeping entry. It has nothing to do with the legal status of the debt. Often, creditors will sell the accounts on which they are owed money to a third party collection company, who then owns all the rights to pursue the debt, just as the original creditor did. What ends up happening is that a debt you thought was long gone, suddenly resurfaces after several years, when the new owner of the debt commences a lawsuit to collect on it.
This can have an impact on your credit report as well, because if that creditor gets a judgment, then the judgment will be on your record for at least another 7 years.
It is important not to assume debts have gone away simply because they are “charged off.” More often than not, you will still have to deal with that debt whether through a bankruptcy or some other alternate means.
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