Charge-off

A charge-off or chargeoff is a declaration by a creditor (usually a credit card account) that an amount of debt is unlikely to be collected.

Traditionally, creditors make this declaration at the point of six months without payment.

While a charge-off is considered to be "written off as uncollectable" by the lender, the debt is still legally valid and remains so after the fact.

The creditor has the right to legally collect the full amount for the time period permitted by the statute of limitations applicable to the location of the financial institution and the consumer's residence.

[1] The purpose of making such a declaration is to help support a tax deduction for bad debts under Section 166 of the Internal Revenue Code.