**What Happens When Credit Card Debt Goes to Charge-Off and Collections?**
When you fall behind on credit card payments, the consequences unfold in stages, each one more serious than the last. At first, you’ll be hit with late fees and penalty interest rates, which increase the cost of your debt. Next come more urgent phone calls and letters from your creditor. If several months go by without payment, your account enters more severe territory that many borrowers don’t fully understand: the charge-off and collections phases.
These two phases often get lumped together, but they represent distinct milestones in a creditor’s attempt to recover what you owe. The difference between charge-off and collections can significantly impact your options for resolving the debt.
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### What Is a Charge-Off?
When a creditor charges off your account, they make an accounting decision to classify your debt as unlikely to be repaid. However, your obligation to pay remains intact. This moment is particularly important because it directly precedes the collections process. Knowing how long you have before your debt moves from charge-off to collections can help you take action at the most strategic moments.
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### How Long Before a Charge-Off Goes to Collections?
Most creditors charge off accounts after 180 days (about six months) of non-payment. During those six months, you’ll typically receive numerous calls, letters, and emails from your creditor as they attempt to collect the debt.
However, the debt being charged off doesn’t always mean it’s immediately sent to a third-party collections agency. Sometimes, the original creditor will continue trying to collect the debt with their internal collections team—even after charging it off. This internal collection period can last from a few weeks to several months.
During this time, you’re still dealing directly with the original creditor, which can actually work in your favor when negotiating payment arrangements.
Many creditors, though, sell charged-off debts to collection agencies relatively quickly, often within 30 to 90 days after charge-off. Once sold, the collection agency becomes the new owner of your debt and takes over all collection efforts. This is when you’ll begin receiving communications from a different company, and your approach to handling the debt may need to shift accordingly.
**Note:** The charge-off itself appears on your credit report and can significantly lower your credit score. The missed payments and related negative marks remain on your credit report for seven years from the date of your first missed payment, regardless of whether the debt is eventually paid off or settled.
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### Easiest Ways to Deal with a Charged-Off Account
Once a debt is charged off, it may feel like your options are limited, but you still have several ways to address it:
**1. Pay the Debt in Full**
This is the most straightforward approach. While it might not be financially feasible for everyone, paying the full balance ensures the account is marked as “paid” on your credit report.
**2. Negotiate a Payment Plan or Settlement**
If you can’t afford to pay in full, contact your creditor or the debt collection agency and request a payment plan. Alternatively, you (or a debt relief company) can try to negotiate a reduced lump-sum payment. Many creditors and collection agencies will accept less than what you owe (sometimes as little as 50% of the original debt) if you’re experiencing genuine financial hardship. The account would then be marked as “settled” rather than “unpaid,” which is better for your credit than leaving it unresolved.
**3. Work with a Credit Counseling Agency**
If your account hasn’t yet been sold or is still collectible by the original creditor, a credit counseling agency may be able to help. A credit counselor will work with your creditors to try to reduce interest rates, waive fees, and help you create a repayment plan that combines your debts into one manageable monthly payment. These programs can help you tackle your debt and prevent additional accounts from being charged off.
**4. Consider Bankruptcy (as a Last Resort)**
If your financial situation is truly dire, filing for bankruptcy might be worth considering. While this is the most serious option and should be treated as a last resort, Chapter 7 bankruptcy can discharge many types of unsecured debt, including charged-off credit card accounts.
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### The Bottom Line
A charge-off might feel like the end of the road, but it’s really just another step in the debt collection process. After about six months of missed payments, lenders typically charge off accounts and may sell them to debt collectors, who will then continue pursuing repayment.
The sooner you act, the better. Whether by negotiating directly, working with a reputable debt relief company, or entering a debt management program, resolving a charged-off account can help stop collection calls, prevent legal action, and set your credit on the path to recovery.
**Explore your debt relief options—and take the first step to regain financial control today.**
https://www.cbsnews.com/news/how-long-does-it-take-before-a-charge-off-goes-to-collections/