A credit notation by a lender in a credit report that a debt is "charged off" is not a legal determination that the debt is not owed. To the contrary, it is an indication by the lender that the debt is more than one hundred eighty days past the point when it last received payment. The debt is now considered a loss as a receivable and therefore no longer an asset of the lender. From this point in time it may be either sent to a collection agency who will receive a commission or percentage of the money collected on the debt or the lender may also sell the debt to a third party for a certain percentage. For example, a ten percent sale of the amount owed on a $1,000.00 debt would be $100.00. The third party would try to collect for more than the $100.00 that it purchased the debt. Its profit depends on what it ultimately collects on the debt. Typically the third party purchasers were either once collection law firms or are closely associated with collection law firms. They have decided there is more profit on owning the debt than collecting the debt for the lender. A "charged off" account will last seven years from the date it was last due when declared delinquent. If the debt has been purchased a new account is created for the same debt on a credit report. In any event, it is best to stay ahead of the enforcement of this kind of debt as its "charged off" status makes it more likely to be enforced by whoever owns the debt because their profits are dependant upon enforcement through lawsuits, garnishments, levies, etc.
Wayne County business owners are no doubt aware that Chapter 11 bankruptcy is an option for large corporations that run into financial difficulty. It seems that companies seeking Chapter 11 protection are in the news all the time. But, can small business owners take advantage of this kind of business bankruptcy too? The answer is, "yes."
Folks in Michigan have probably heard that most consumer bankruptcy filings are done under one of two chapters of the bankruptcy code. Chapter 7 and Chapter 13 are the two chapters in question. What are the differences between these two? From a consumer's point of view, is one more desirable than the other?
As we have discussed before on this blog, Chapter 7 bankruptcy can be a good way for people in Wayne, Michigan, to get a fresh financial start after a bad experience with debt. Many people have benefited from this fresh start, rebuilding their credit and getting their lives back on track financially.
Wayne County residents who want to increase their level of financial literacy should familiarize themselves with the ways that consumer bankruptcy can help them eliminate debt. This is arguably the take-home message from a recent study that shows how states with higher levels of financial literacy often have higher levels of bankruptcy filings.