Does a charged-off account eliminate objections?

[Keebler]

I'm on the verge of accounts charging-off because they've been delinquent for nearly 180 days. I know a charge-off doesn't relieve me of the debt and further collections or lawsuits are expected. Does a charge-off completely terminate my relationship with the original creditor? Am I done with them at that point?

I know the debt can be sold and a subsequent attorney or company will try to collect. But, what is the status if the original creditor after that point?

If a charge-off makes me owe someone other than the original creditor, can the original creditor then object to discharge when I file Bankruptcy? Wouldn't it be the new owner of the debt that would need to object?

I know charge-offs on my credit report prior to Bankruptcy will stay on my report, but there might be a benefit if the charge-off eliminates the original creditor's right to object to discharge on the basis of recent charges or cash advances.

See what I'm saying?

[erinmi]

I am curious about this as well...

We have a short sale deficit reporting on my husband's credit for roughly $38,000. It has been over 180 days, so they reported it as charged off but I know they are still trying to collect it along with an attorney's office that started calling us about a month or so ago.

[keepmine]

Just because a debt has been chargedoff, does not mean it's been sold to a 3rd party collector. Recent CO's are frequently assigned to a collection agency as opposed to sold.
An interesting thought. Should you file bk and a creditor you don't recognize or, don't believe has standing can be required to prove they own the account. {If they file a claim}

Claims Purchaser Violated Rule 9011 in Filing Proof of Claim

In an opinion examining "the standard operating procedures of one creditor whose entire business centers on [the] purchasing and filing of bankruptcy claims and the receipt of dividends on account of such claims," an Ohio bankruptcy court has ruled that the claimant violated its obligation under F.R.B.P. 9011 to make a reasonable inquiry prior to filing its proof of claim against the Chapter 7 debtors. The court declined to award sanctions, however, finding that none were warranted in light of the time and energy devoted by the claimant's senior management in response to the court's show cause order.

After purchasing, at a significant discount, a portfolio of alleged bankruptcy claims, the claimant filed a proof of claim against the Chapter 7 debtor-husband for "money loaned." The debtors, who had not identified in their schedules any claim for the claimant or for the entity identified in the claimant's proof of claim as the originating creditor, objected, asserting that, to their knowledge, they did not have any indebtedness to the originating creditor and, hence, to the claimant. The court directed the claimant to find the supporting documentation for its claim, and stated that it was not going to simply allow the claimant to withdraw its claim. The claimant, however, purported to withdraw its proof of claim, thereby ignoring a specific court order as well as F.R.B.P. 3006, the bankruptcy rule governing withdrawal of claims. The court then entered a show cause order directing the claimant, which filed numerous claims in this and other bankruptcy courts, to explain fully its routine for filing proofs of claim in bankruptcy cases and raising the issue of whether Rule 9011 sanctions should be assessed against it for having filed an unsubstantiated claim. In response, the claimant filed a pre-hearing brief, accompanied by the sworn declarations of its president/chief operating officer, its operations manager, and its in-house attorney, and a show cause hearing was held.

The court began its opinion by noting the "exponential increase" in the trading of bankruptcy claims that has occurred over the last two decades, fueled, at least in part, by technological developments such as electronic case filing (ECF) and proprietary software that is able to conduct searches with limited human attention. "Once a fairly low-volume activity restricted to chapter 11 cases (and primarily undertaken to achieve strategic influence in chapter 11 cases), claims trading now also routinely occurs through the purchase and sale of `claims portfolios' in consumer cases," the court observed. "Apparently lost in the fast-paced world of selling and purchasing bankruptcy claims has been attention to compliance with long-established bankruptcy procedures for filing proofs of claim," the court stated, adding that the claimant would have this and other bankruptcy courts accept "industry standards" as excusing its noncompliance with F.R.B.P. 3001, the bankruptcy rule governing proofs of claim, and its failure to fully complete Form 10, the official form adopted in conjunction with that rule. "Thus, this case poses the central question whether an industry that has grown up solely to operate within the bankruptcy system can expect courts to ignore procedural rules that were in place prior to the birth of the industry because compliance with those rules would not promote maximum efficiency for the claims trading industry."

Rule 9011(b) focuses upon the circumstances surrounding the filing of a document that is later subjected to Rule 9011 scrutiny, the court explained. Rule 9011(b) provides, in pertinent part, that, "[b][b]ecause of the time and energy that [the claimant's] senior management devoted in response to this Court's show cause order . . . the Court [did] not view any further sanctions to be necessary." In re Wingerter, 2007 WL 2932809 (Bkrtcy.N.D.Ohio, Judge Shea-Stonum).

[HHM]

That is all well and good, but that opinion relates to the "purchaser" filing an objection, not whether the original creditor can come back and file an objection.

Keep in mind, objection have a limited life, about 6 months. If the objectionable charge is more than 6 months old, the odds of an objection are slim. Most credit card companies charge off debts that are at a minimum 6 months old, and usually older.

There is nothing stopping the a "reassignment" of the debt to the original creditor (although the accounting gets complicated). But, from a strict legal perspective, charging off an account does not limit a creditor from filing an objection...but at the same time you have a better chance of being struck by lightening then having an original creditor object on an account they already charged off.

[neolla]

just a follow-up

this is a follow-up to the thread above, so what should a debtor do with regard to those debts that have been charged-off and assigned or sold? does she/he include them both in the petition or should just choose either the original account or the purchaser of the debt?

also, in cases where the debt has been a subject of a judgment in court (collection case), does the debtor still include the original debtor (cc) or the purchaser of debt?

thanks

[HHM]

You include everyone.

[keepmine]

this is a follow-up to the thread above, so what should a debtor do with regard to those debts that have been charged-off and assigned or sold? does she/he include them both in the petition or should just choose either the original account or the purchaser of the debt?

also, in cases where the debt has been a subject of a judgment in court (collection case), does the debtor still include the original debtor (cc) or the purchaser of debt?

thanks

I had 2 accounts that had been transfered to collection agencies. My lawyer listed the orginal creditor and the balance and then below them, typed sold, transfered or, assigned to XYZ Inc. and listed a zero balance.
It's a good idea to list everyone who has ever touched the account.

[phoenyx]

I'm on the verge of accounts charging-off because they've been delinquent for nearly 180 days. I know a charge-off doesn't relieve me of the debt and further collections or lawsuits are expected. Does a charge-off completely terminate my relationship with the original creditor? Am I done with them at that point?

A charge-off only affects the accounting of the debt. It's when the creditor decides that they are unlikely to collect the debt, and have to start reporting it as a loss on their books rather than a collectable asset. They still have the right to attempt collecting the debt, and if they do so, they fix whatever is needed on the books to reflect its collectability.

So, a charge-off does not terminate your relationship with the original creditor.

I know the debt can be sold and a subsequent attorney or company will try to collect. But, what is the status if the original creditor after that point?

As someone previously stated, recent charge-offs often aren't sold immediately to a collection agency or attorney. Rather, if the original creditor decides it isn't making progress on collecting the debt, they assign a collection agency or attorney to go after collecting the debt -- while the original creditor still holds the debt. Even if payments are made payable to the name of the collection agency or attorney, the debt can still be owned by the original creditor.

In my situation, only one of my debts was ever actually resold, and that was a whopping balance of about $30! All of the credit card and loan accounts (of which there are about 15) never got resold - even 2 years after they were "charged-off".

If the debt is actually sold, then the original creditor takes whatever payment the collection agency or attorney pays, and washes away the rest. On the original creditors books, you wouldn't owe them anything anymore. Note, in certain circumstances debt can be "re-sold" back to the original creditor, then you would owe them in full again. I had this happen when a collection agency claimed the original creditor didn't give them accurate information on the account so was able to re-sell it back to the original creditor.

If a charge-off makes me owe someone other than the original creditor, can the original creditor then object to discharge when I file Bankruptcy? Wouldn't it be the new owner of the debt that would need to object?

I know charge-offs on my credit report prior to Bankruptcy will stay on my report, but there might be a benefit if the charge-off eliminates the original creditor's right to object to discharge on the basis of recent charges or cash advances.

See what I'm saying?

Again, a charge-off itself won't make you owe someone other than the original creditor -- only if they actually sell the debt to someone else. It makes sense to list everyone who ever touched a debt just to cover your bases, but if they actually sell the debt, I don't think they would have anything to object to -- I think it would be the new owner. But remember that charge-offs are often assigned for collection rather than sold.

I believe the new owner would retain any rights the original creditor had to object to fraud, but most of the time the debt is way way past 6 months old by the time it is ever resold, if ever. It's the timeframe that impacts the objections really, not the charge-off status itself.