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CAT Re: Charge offs........
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Posted by Reformed
(24.176.145.220) on July 10, 2004 at 13:09:27:
Maybe I can clear up some of the confusion about CO's. A company must (by law) charge off an account as a non-performing account. This means it is no longer counted as an asset. They must do this as an accounting entry so as to not make their bottom line look better than it is. If they did not CO bad accounts this would mislead investors and cause the stock price (if it is a publicly traded company) to be MUCH higher. Once the account is 180 days they MUST CO but they may do so sooner if they wish.
At any time during that 180 days they can (may) CO, assign to CA or sell to debt buyer.(Most will not sell during the 180 day time frame because they can keep on listing it as an asset). After 180 days it must be CO. They may then do the following: NOTHING!(unlikely) ,try to collect it themsevs (if they have in-house collections), assign it to CA, sell to debt buyer. There are many firms that only buy and then "farm" it out to different CA's. This is why some think their account has been "sold" several times. Debt buying firm ABC bought the account. They then give (assign) it to NCO for 60 days(could be any length of time), if NCO cannot collect on it then it goes back to ABC who then assigns it to another and so on. Of course the older the account gets the less it is worth. They might sell it to another company who go after older accounts. Each debt buyer has an area that is their nich market. The good thing is the more it is sold and the older it gets the less chance of ANY paper work to back up their claim in court.
Hope this helps, Jeff
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