Of all the things to avoid financially, a charge off is one of them. Not only can a charge off devastate your credit, but it is also quite difficult to deal with. Still, many people don’t know much about a charge off. If you are one of these people, continue reading:

What is the definition of a charge off?
A charge off is the term given to debt that has been deemed uncollectable by the creditor. In other words, a charge off is bad debt. Usually a charge off will appear on an account if a payment hasn’t been received - and the creditor not contacted - for six months.

When an account is listed as a charge off, it means that the creditor no longer considers your debt an asset. It is written off, but that doesn’t mean it just goes away. Instead, the debt is still your responsibility.

After an account is charged off, what happens next?
After your account is listed as a charge off, it will be reported to all three credit bureaus. This mark on your credit is one of the worst you can have. It will stay on your credit report for at least seven and a half years.

What does this do to me?
After your account is labeled as a charge off, your credit will be drastically hurt. This can impair you in all sorts of ways. You may be prevented from getting a house, an apartment, a car, and a job. You will also still be responsible for the outstanding debt. Creditors or collection agencies will begin to pursue you for your payments.

What can I do to avoid a charge off?
Obviously, the best way to avoid a charge off is to pay your bills on time. If this can’t happen and you’ve fallen behind, call your creditor and explain your situation. Try to solicit compassion and negotiate as best you can. You can even ask your creditor how much you have to pay them in order to avoid a charge off. You may even be able to negotiate a payment plan. No matter what you negotiate, it’s important to do what is best for you. Don’t let creditors or collection agencies push you around and don’t agree to a payment plan that is out of your price range.

Many people are uncomfortable with negotiating. If you fit into this category, there are professional debt relief companies and credit counselors who can do the debt negotiation for you.

How do I remedy a charge off?
If your account has already been labeled as a charge off, there are a few things you can do to help yourself. Begin with calling your creditor and see if you can pay them directly, instead of going through their collection agency. Next, find out the balance on your debt and tell your creditor that you do intend to pay it. Ask them to work with you on a payment plan that you can afford. Don’t agree to something that will leave you in more debt. After your debt has been paid off, or paid off as agreed, ask your creditor to remove the charge-off from your credit report. Your creditor, at the very least, has to list your account as “paid charge off.” Check your credit report at least once a year to determine that it is accurate.

A charge off hits your credit report below the belt, but it’s certainly not the end of the world. By taking control of your account, you can start to rebuild your credit and regain your life. Debt negotiation and debt settlement companies can help you deal with an existing or impending charge off. At the very least, consider a charge off a wake-up call to control your finances, before they control you.