Tuesday, December 16, 2008

What is the Difference Between a Collection and a Charge Off?

Q: What is the difference between a collection account and a charge off?

A: A collection account is an account that is delinquent and has been sold (usually at a discount) to a collection agency. The consumer now owes the collection agency, and not the original creditor, for the debt.

A charge off is a delinquent account that has been "written off" the creditor's books. The creditor takes a tax deduction for the loss, and no longer attempts to collect the debt from the consumer.

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