LawRefs Customized Legal Information
Attorney Renee C. Walsh

Getting Sued for a Debt that is “Charged Off”

If you have a delinquent debt, after some time it will show up on your credit report as “charged off”. A frequent inquiry is “what does this mean” and can I still be sued for it?
“Charge off” does not mean the debt has been canceled. You still owe that money but likely owe it to another party.

If you see “charge off” appearing on your credit report, this means that the creditor is letting other potential creditors of yours know that they had to write off the debt as a bad debt because you did not pay your bill. In most cases, the creditor does not collect the debt from you but rather sells it to a collection agency.  Since you owe the creditor, the debt is his to assign to another party so that they jump into his shoes and can sue you as if you originally contracted with them.

Creditors collecting on debts must do it legally.  They must follow their state and federal collection practices acts.  They must also report your history with them accurately and legally according to state and federal credit reporting acts.  Your bad history will show up for seven years.  If you finally pay the debt, then your report should be updated to include an indication that the debt has been paid, such as “charged-off paid” or “charged-off settled.”

If you have a valid defense to paying the debt, you are entitled to indicate that in an explanation that will show up next to the adverse incident on your report.  This is a step to take while settling the matter with the creditor.  In negotiations for settlement, consider including a clause in the settlement agreement that the creditor will not report the debt negatively on your credit report, and as always, put everything in writing.


  1. I had an account that was charged off by the original creditor. The account was taken over by a 3rd party and is now suing for the charged off amount. They probably bought the account for a fraction of the cost. Can they sue for full amount or can I just pay them what they bought the account for and have it settled?

    • Dear Jerry M:

      Usually these collectors will settle with the debtor for a fraction though they probably have the right to collect whatever was owed the original creditor.

  2. Can you please post what the State of Michigan considers "competent evidentiary material" for debt validation from a debt buyer? Are they required to provide copies of the assignment contract from the original creditor to the debt buyer and/or copies of the original contracts signed between the creditor and the debtor? How does one know for sure the debt buyer owns the account and has a legal right to collect the debt?