Charge-offs

[howdidithappen]

What exactly is a charge-off of a debt?

[justbroke]

It's a financial account practice which "removes" the debt from the lender's books. This doesn't mean that the debtor doesn't owe the money anymore, just means that the lender has written off the amount as non-collectible.

[frogger]

I've charged off some debt that was due to my company. All that got charged off got a 1099 from me for the forgiveness of debt.

[NoMoreCards]

So then the debt is noncollectable even at a later time? So, if I understand this... If you issue a 1099 for a debt that was forgiven, you (or a collections agency) can never go after said person for that particular debt down the road?

[NoMoreCards]

I see...very interesting!

The things I have learned here are amazing. Thank you so very much for the clarification.

[albacore44]

In the corporate world we call these O & R's = opportunities ans Risks. When a debt becomes late it becomes a Risk. It is then determined to be "Low,medium,or High" Once the debt is charged of the bank can choose to take a loss against earnings, thus lowering the tax they pay on earnings.

Now if they decide to continue to persue the debt after charge off, it becomes an "opportunity", and it is graded Low, medium,High, based on an estimate of possible recovery. if its recovered, it gets added back into earnings.

This is one of the elements companies use to forcast future earnings to their stockholders.

[frogger]

This issuance of the 1099 is what makes the debt forgiven. And you are correct it is non-collectible later. But always save that 1099 for the rest of your life (literally) as it is your only defense you do not owe it.

In the case of say a debt settlement, you would get a 1099 for the portion that was settled the rest of the debt, well that can come back to haunt you later. But thats another topic.

Exactly. And the only time that I have forgiven debt and issued 1099's for it is right before the stats went out. Up until that time, I try to collect them.