If a credit card company (Target National Bank) has charged off an account, can they still sue the debtor?

Asked about 2 years ago - San Diego, CA

The debt (over $5,000) was charged off in January 2012. The debtor has received letters from a law firm (CIR Law offices) offering a reduced settlement. Last letter from law firm was dated 3/5/12. Debtor sent a debt validation letter to law firm on 4/2/12. On 4/5/12 debtor was served with summons and complaint (filed on 3/29/12). Plaintiff is listed as Target National Bank. How can Target National Bank take a tax credit from a charged off account AND sue the debtor? Or is the law firm (CIR Law Offices) a debt buyer who is suing the debtor and masquerading as Target National Bank?

Attorney answers (5)

  1. Nikhil J Chawla

    Contributor Level 8

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    Answered . Hello. This link may help with a little extra guidance as to your charge off questions - http://www.cardhub.com/edu/charge-off-guide/ (please take the content from this site as general guidance on this issue, as this is a commercial site and it may report biased information)

    As far as collection agencies (like CIR)... debt is commonly sold, traded, and maybe even sold again. Far too often Debtors do not require collection agent/agencies validate the debt which they are trying to claim. The Fair Debt Collection Protection Act (FDCPA) protects Debtors from unfair/improper collection methods, and lays out what a collection agency must do to "Validate" debt. Here is a relevant section:

    FDCPA Section 809. “Validation of debts” [15 USC 1692g]

    (b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.
    (Note, this section is applicable to “debt collectors” and not to the original lender.)

    Unfortunately, if the collection agent/agency satisfactorily validates the debt, and the statute of limitations hasn't run, then (as my colleague noted) the debt is still collectable (whether "charged off" or not).

  2. Frank Wei-Hong Chen

    Contributor Level 20

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    Answered . Yes, absolutely.

    A charge-off is the declaration by a creditor (usually a credit card account) that an amount of debt is unlikely to be collected. This is an internal accounting designation often designed to give the creditor a tax exemption on the debt. Often, these charged off "bad debts" are then sold to collection agencies, but does not have to be.

    A charge-off does not free you, the debtor, of having to pay the debt. The debt remains legally valid, and the creditor still has the right to collect the full amount so long as it is within the statute of limitations period.

    Frank W. Chen is licensed to practice law in the State of California. The information presented here is general in... more
  3. Michael Stephen Agruss

    Contributor Level 10

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    Answered . I agree with all of my colleagues. I'm familiar with CIR's practices and I know one of CIR's in-house attorneys. CIR will likely litigate this case through judgment. Therefore, if you owe the debt, I suggest that you try to settle it with CIR. Also, respond to the lawsuit, either personally or through your lawyer, by the date specified in the court papers to preserve your rights. Once again, do not ignore a lawsuit.

    Information on Avvo should not be construed as legal advice, as each case is different. For information about... more
  4. Douglas Gist Farquhar

    Contributor Level 11

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    Lawyer agrees

    Answered . I agree with what the others said. This debt was charged off by Target but sold to a collector, CIR, who now owns it and can collect the full amount from the debtor. And don't forget about interest because they will add that continually to the original debt. If they sue the debtor they will add court costs and attorney fees.

    No one has mentioned bankruptcy as a possible option though. If the debtor has other debts the debtor may want to contact a bankruptcy attorney to see if bankruptcy is a viable option for the debtor to pursue. If the debtor did file and get a discharge then the debtor would not owe this debt or any other dischargeable debts any longer and CIR could no longer contact or sue the debtor.

    Douglas G. Farquhar, Esq. 619-702-5015

  5. Wesley Kent Hill

    Pro

    Contributor Level 14

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    Answered . Actually the bank will take a deduction for bad debt when they write it off and not a credit. If at some point in time, the debt is collected, the company will have to claim it as income. Accrual basis tax payers can make an estimate of bad debt and recognize it on the tax return. It is an estimate because they do not know for certain what part may actually be collected. As I said previously, if collected it is again included in income.

    That tax deduction the company takes has no bearing on the collectibility of the debt.

    This response does not create an attorney client relationship nor should the advice be relied upon because it is... more

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