How does debt happen?

About debt

How does debt happen?

The basics, including what happens when an account gets 'charged off.'

“How does debt happen?”

Debt can happen in many ways and for many reasons. Generally, a consumer debt is an obligation to pay money on a credit card, installment loan or other credit agreement, primarily for personal, family, or household purposes. When the consumer is unable to make payment(s) on that debt, the debt collection process may begin.

“I had credit card debt, but now I’ve been told that my account is 'charged off' – what does that mean, and do I still owe it?”

When an account becomes delinquent, the original creditor (generally the company that provided the loan or credit) usually makes an effort to collect it. If the amount due remains unmet for a period of time, then the creditor may decide the account is unlikely to be collected upon.

In that event, the creditor will "write-off" – or as it is more commonly termed, "charge-off" –that account and then may choose to sell the unpaid account to a debt buyer.

A charge-off does not mean that the debt is forgiven or that it is not owed.

“How does debt buying work?”

After the original creditor undertakes a charge-off of the account, then that creditor may choose to sell that unpaid account to a debt buyer. The debt buyer is then the new owner of the debt and can undertake their own collection efforts on the unpaid account.

Our “Explainer” video & transcript

Each year millions of people fall behind on their bills for many reasons - Things don't go as planned, and then debt happens...

When a person is unable to pay back a loan, credit card or another account, their creditor may sell that debt to a company like ours.

If your account was sold to us, we’re here to help make repayment easier. We’ll send you a welcome letter that explains who we are and invites you to access your account online - where you can view your account information, and manage flexible payment options that allow you to create an affordable payment plan, reschedule a payment or pay it all off.

We will not charge you any servicing fees, nor sell your account. And when your debt is resolved, we’ll happily send you a confirmation.

Because we understand debt happens.

We're Portfolio Recovery Associates LLC.

We're changing the way debt repayment works by treating our customers with the fairness and respect they deserve.

We've helped millions of people resolve a debt - let's work together to find your path to recovery.

Debt happens. So can recovery.

This content is for informational purposes only and should not be considered legal or financial advice. There may be other resources that also serve your needs and if you have questions about personal finances, please consult a financial advisor.

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