Charge-Off
Content
Definition
Charge-Off is the declaration by a creditor that an amount of debt is unlikely to be collected, indicating that it is considered "bad debt" and written off the books.
Usage and Context
Charge-offs happen when companies decide they can`t collect a debt. This often occurs after several failed attempts to get the payment. It`s common in credit card and loan industries.
Frequently asked questions
- What is a charge-off by a creditor? A charge-off is when a creditor decides a debt won`t be paid. They mark it as bad debt and remove it from their accounts.
- What does it mean when bad debt is written off? Writing off bad debt means a company decides a debt won`t be paid. They remove it from their financial records.
- Is bad debts written off and bad debts recovered the same? No, they`re not the same. Bad debts written off are considered lost. Bad debts recovered are when a company gets payment for a debt they thought was lost.
Benefits
Charge-offs help companies clean their books. They remove unlikely-to-be-paid debts, making financial health clearer.
Conclusion
Charge-offs let businesses focus on the money they can collect. It`s a way to clear up finances and move on from unpaid debts.
