Post-dismissal collection efforts

[empowered]

I'm puzzled about credit card debts that were charged off a few years back and which led to me filing Chapter 13 since the credit card company refused to negotiate with me on any kind of payment plans.

My Chapter 13 was dismissed early this year when I could not keep up with payments. I'm currently out of work.

About six weeks back I received "special offer" invitations from the credit card company for each of the three cards I had with them, offering something like a supposed 20% off if I committed to a payment plan with them and made a first payment by early July. It all seemed very bitterly ironic since they denied me any kind of payment arrangements in 2008 and immediately sent all balances to collectors who began calling and demanding $10,000 immediately or trying to trick me into getting a loan from a particular company and using my only asset, my car, to secure it so that I could then pay them some huge amount. They even said the papers could be ready that day for me to sign! I figured that they realized that I'd soon have to surrender my car to them if I accepted the terms. So I filed Chapter 13 essentially to get a payment plan.

Anyway, I'm filing Chapter 7 next month but now the credit card company that I thought had written off my debt is starting to leave automated messages on my phone.

I understand that when I failed at paying the plan and the dismissal occurred the stay was lifted. But why is the credit card company trying to collect on debts that they supposedly "charged off" years back and gave to collectors to collect? I would have thought that these amounts were off of their books.

When I got the "special offers" on payment plans I figured they realize that my next stop is Chapter 7 and that's the only reason why they were finally willing to come up with some payment schedule at all.

Of course, I'm not interested and I can't do it anyway. They should have given me a plan in 2008 instead of putting a slew of negative information on my credit report and basically forcing me into filing Chapter 13 to get out of a jam.

Anyway, I'm curious about what's going on with this process and whether my assumptions are right about these "special" offers.

I guess I'll be off of answering the phone for another three weeks or a month until I get the Chapter 7 filed and will then ensure that the new stay is in place for the duration. (I'm going pro se this time around.)

Thanks.

[frogger]

"Charged off" is only an accounting term. It does not mean that they are not collectable or that you do not owe them.

When they collect a charged off debt, it just is listed as 100% profit, because they took a 100% loss when charging it off.

You still owe the debt.

[treehugger1]

I would guess that the creditors will soon hand the debt over to their hired collection agents soon enough.

[catleg]

frogger is right. Charged off simply means they can no longer accrue interest and fees on the debt and pretend like you're eventually going to pay them. (Up until 180 days after your last payment and before you file BK that's what they typically do).

That's why they try so hard to get you "back on track" and make a payment.

After 180 days it's charged off and goes to "recovery". Just like when there's a plane crash or a boat sinks, first they look for survivors, then it's just a "recovery".

At some point they apply their "loan loss reserves" to the debt for their accounting but they'll usually keep the loan and continue to try to collect. At this point they no longer care about your future business, it's just dollars and cents as to what is the best they can recover and at what cost to themselves.

They may sell it to a debt buyer (most often Portfolio Recovery Associates) who is typically more aggressive and efficient at these things since they don't have the bank's reputation to be concerned with. (I had an account with US Bank that was promptly sold when it charged off. This is unusual.) They may sue you to get a judgment, either themselves (e.g. Chase) or through an outside attorney in your state (e.g. Citi, Cap1, Discover). Or they will just keep it in in-house collections (e.g. BofA). The e.g.'s are examples from my own experience with these guys.

But the debt never really goes away unless its paid or bankrupted.

Your balance usually increases about 20% just during the interval between your last payment and the charge off, so 20% discount is just paying them what you owed in the first place.