Whenever we prepare a bankruptcy petition, one of the things we do is run our client’s credit report. This helps to make sure that all of the client’s debts are listed on the petition and properly discharged. When a client reviews the petition, he’ll see an old debt and ask if it needs to be included because it was “charged off.”
There seems to be a fair amount of confusion about what it means when a creditor charges off a debt. It doesn’t mean that a creditor has decided to let you off the hook for the debt. The debt doesn’t disappear. It simply means that the creditor has decided it is no longer going to try and collect it itself. At that point, the creditor will probably sell the debt to a collection agency, who will pick up right where the creditor stopped. Except that the collection agency will probably go even further, and take you to court.
There are limits to how long a collection agency can go after you for a debt. In Colorado, it’s six years after the debt became due.
So, should you include a debt that has been charged off in your bankruptcy? Absolutely. The only ways to completely erase the debt is by either paying it off or filing bankruptcy.
If you have questions about whether or not a debt has been charged off or can be eliminated in bankruptcy, you should talk to a Colorado bankruptcy attorney.