Bankruptcy

A Charge Off Doesn't Mean What You Think! They're Still Going to Sue You!

By Joseph McDaniel, Esq.

"I don't think I need to list the bank because they already charged off the debt!" said the debtor, brightly!

Turns out that a charge-off is simply an in-bank accounting term for a loan that is a troubled loan and now requires reserving money against the doubtful account.

In other words, you still owe the money to the bank, even after you see on your credit report that the bank "charged off" that debt.

They'll still sue you, or more likely sell the paper representing the debt downriver for smaller and smaller amounts of debt, until you get sued by somebody who paid a penny on the dollar for a bushel basket of bad debt paper from somebody further up the food chain.

And surprisingly, even thought they only paid a penny on the dollar on the debt, the guy who sues you wants the entire amount. Really. With interest. And attorney's fees. And has exactly no sense of humor.

So it's probably a good idea to talk to an Arizona bankruptcy lawyer of any flavor you decide on (board certified or not, AV rated or not, AVVO 10 or not, and with client reviews coming out his ears, or not)when you notice that the bank has charged off your debt, and that you can't pay any of the rest of that fifty or hundred or two hundred thousand in credit card debt.

Because, remember, there is the Joseph C. McDaniel Rule of Inevitable Bankruptcy Filing to contend with; and while it's not really inevitable, it's sure how the smart money bets.

Because if you have more unsecured debt than you earn in a year, you may well have a bankruptcy in your future. And that's not necessarily a bad thing, because the bankruptcy (depending on the flavor of the bankruptcy) will give you a fresh start.

And a fresh start is a good thing.

Frankly, your income looks much bigger to you if you're not making those four thousand dollar house payments every month, and paying three thousand on your credit card flotilla.

And that's a good thing.

But remember NOT to permit the trustee's sale to take place, and THEN go to visit the Arizona bankruptcy lawyer of your choice, because maybe the mortgage payments on the dirt that was subject to a trustee's sale are necessary for you to pass the means test.

Now, if you goofed up, don't worry too much. Heidi the Bankruptcy Angel, and Nina the Unpronounceable are pretty darn good at crunching numbers for the means test, so we will probably find some way to shoehorn you into a Chapter 7.

But, come on, do us a favor; give us more tools to work with, rather than fewer, okay?

NOTHING HERE CONSTITUTES LEGAL ADVICE RE A CHAPTER 7, CHAPTER 13, CHAPTER 11, OR CHAPTER 12. FIND AN ARIZONA BANKRUPTCY LAWYER WHO IS BOARD CERTIFIED IN BANKRUPTCY LAW, AV RATED, AVVO 10 RATED, ON SUPERLAWYERS, OR JUST VERY EXPERIENCED AND A FORMER CHAIR OF SOME BANKRUPTCY SECTION OR COMMITTEE. NOTHING HERE MAY BE USED AS LEGAL ADVICE IN CONNECTION WITH ANY BANKRUPTCY, WHETHER THAT BANKRUPTCY IS IN PHOENIX, GLENDALE, TEMPE, MESA, SCOTTSDALE, OR ANYWHERE ELSE.

Full post as published by Arizona Bankruptcy Attorney Blog on June 10, 2010 (boomark / email).