Your credit report includes the history of your loans and repayments, as well as any charge-offs, which creditors report on delinquent balances. Like a bankruptcy filing, a charge-off can seriously damage your credit score and hinder your ability to secure credit. A successful discharge of a bankruptcy case ends your obligation to pay dischargeable debts. However, charge-off and a discharge of bankruptcy are two very different events.
When you file a petition for bankruptcy, the filing is reported immediately to the credit bureaus.The bankruptcy filing remains on your credit report for a minimum of 10 years; you can't remove the bankruptcy by having the case dismissed or achieving a discharge of your debts. At the end of the bankruptcy case, a discharge cancels any outstanding debts that the law allows to be discharged. This usually includes credit-card balances, installment loans, and personal loans, but not overdue taxes, federally guaranteed student loans or child support obligations.
Charge-off is an accounting term that means a creditor now considers a debt to be not collectible. The creditor reports the charge-off to the credit bureaus, although the debt remains legal and valid. In most cases, the creditor turns the outstanding balance over to a collection agency, which is allowed to attempt to collect the debt (as long as you haven't filed for bankruptcy protection) on the creditor's behalf. Like bankruptcy, a charge-offs is considered a "major derogatory" that will lower your credit score until it is either resolved or removed.
Discharge of Debts
When a bankruptcy court discharges a case, a creditor whose debt has been effectively canceled is required to charge off that debt, regardless of the delinquency status. If you contract a debt just before declaring bankruptcy, however, a creditor may file a motion with the bankruptcy court to allow repayment from your assets, or request a stay of the order to cease collection action. The effect of the charge-off on your credit report is the same as if the debt had been charged off prior to the bankruptcy, although a creditor holding a discharged claim is not allowed to pursue the debtor for payment.
A bankruptcy discharge does not prevent you from contracting more debt. If you take out a loan after a discharge, you are obligated to repay the loan, and the creditor is allowed to charge-off the debt if your payments run late. The standard charge-off is taken on accounts 180 days delinquent by credit card companies, and 120 days delinquent by auto and installment lenders. Once a bankruptcy is discharged, lenders can pursue you for new (and late) debts by any and all legal means, including collection actions and civil lawsuits.
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