Charge-off.
In plain English
After roughly 180 days of missed payments, accounting rules make the lender declare the debt unlikely to be collected: a charge-off. The loss goes on their books, the black mark goes on your report, and here's the part that surprises people: you still owe the money. The debt is usually sold or sent to collections, and the charge-off notation stays on your credit report for up to seven years from the first missed payment.
01Why it matters
A charge-off is one of the heaviest single items on a credit report, and the decisions after it (pay, settle, dispute, wait) each have different credit and tax consequences worth understanding before acting.
02The math, step by step
A $2,000 card balance goes unpaid for six months and charges off. A collection agency buys it and offers to settle for $900. Settling can read "settled for less than full balance" on the report, and forgiven debt of $600 or more can generate a 1099-C as taxable income.
03What this is NOT
Charged off does not mean forgiven, erased, or uncollectible. It's an accounting status at the lender, not a release of the debt.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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