Arizona Bankruptcy Charge-Offs: What are they?

Many people are confused about the difference between a charge-off and a bankruptcy discharge.  What is the difference, and which one is better?

A charge-off occurs when your creditor, usually the bank with which you have your credit card, declares that your debt is unlikely to be collected.  The bank has, after assessing your situation, including how much debt you have, how long you have had it, and whether you have been making payments, come to the conclusion that you are not going to be able to pay it back.

Traditionally, this occurs after six months of nonpayment, but sometimes can occur after four months.

The bank does not do this for your benefit, it does it for theirs.  If the bank declares a charge-off, it can seek a tax exemption on that debt.  However, you are still on the line for that debt.  A charge off has no effect on your legal obligation to pay that debt back.

Charge-offs are bad for your credit, and do not mean you are off the hook for that loan.  In fact, the creditor may still call you, collect from you, and take you to court to seek wage garnishment or for a judgment lien.  If the court obtains a judgment lien or wage garnishment right and starts to collect from you without your permission, you may be able to stop the process in bankruptcy, but may not be able to reverse the collection that has already occurred.

This is why it is important to avoid a charge-off.  Bankruptcy in Arizona is one way you can discharge that credit card debt and avoid having your possessions taken.   Talk to an experienced attorney about the options available to you if you believe you face a charge-off.