A charged-off receivable is all or part of a loan, credit-card balance, or other receivable that the creditor has concluded is uncollectible enough to remove or reduce its recorded asset value. The write-off records the loss in the creditor’s accounts: a bank generally charges the balance against its allowance for credit losses, while accounting presentation varies by creditor and applicable accounting rules. Later recoveries may still be recorded. The charge-off does not, on its own, cancel the borrower’s contractual obligation, settle the account, transfer ownership, or establish that collection is legally permitted in every circumstance. For federally supervised retail credit, the FFIEC Uniform Retail Credit Classification and Account Management Policy generally calls for closed-end retail loans to be classified as loss and charged off at 120 cumulative days past due, and open-end retail accounts at 180 days. The policy has specific rules and qualifications, including for residential real-estate-secured loans, collateral, and certain exceptions; these are supervisory standards, not a universal statutory deadline for every creditor or debt. In portfolio sales, a charged-off balance may be retained for recovery or sold to a debt buyer. Buyers and servicers assess account-level records, ownership and assignment evidence, balance and payment history, applicable consumer-protection requirements, and state-law time limits before collection activity.
Charged-Off Receivables
Charged-off receivables are loan or credit-account balances a creditor has determined are uncollectible and recognized as a loss by reducing the asset’s carrying value—typically through an allowance for credit losses or bad-debt expense, depending on the creditor’s accounting. A charge-off is an accounting and supervisory treatment, not, by itself, debt forgiveness: the claim may remain enforceable and collectible, subject to applicable law.
Operational Meaning & Core Elements
Statutory Framework & Jurisdictional Scope
United States. The 120-/180-day benchmarks derive from federal banking-agency supervision through the FFIEC uniform retail-credit policy, as applied by the relevant agencies to supervised institutions. They are not a generally applicable statute of limitations or a charge-off mandate for every lender. Under that policy, “retail credit” means open- and closed-end credit to individuals for household, family, or other personal spending and includes certain personal-residence-secured loans. The policy is not the governing retail framework for commercial/business receivables; commercial loan write-offs instead follow applicable U.S. GAAP (including the current expected credit loss framework where applicable) and the creditor’s relevant agency supervisory rules and policies. A charge-off alone does not extinguish the debt. Whether a claim remains enforceable, and whether a collector can sue, depends on matters such as payment/settlement, bankruptcy discharge, contract, and state law. State statutes of limitation and federal consumer-collection protections may affect remedies and conduct; they do not turn accounting classification into debt cancellation. This is a general U.S. glossary explanation, not legal or accounting advice.
Why It Matters for Debt Buyers, Creditors & Operators
For creditors, a charge-off recognizes deteriorated asset quality, supports accurate financial and regulatory reporting, and separates expected loss recognition from any later recovery. For debt buyers and receivables operators, “charged off” identifies an accounting status—not proof that a balance is forgiven, legally collectible, correctly stated, or owned by the seller. Portfolio valuation and servicing therefore depend on reliable account-level data, documented transfer and chain of title, payment and adjustment history, and checks for settlements, disputes, bankruptcy, and applicable limitation periods. Misreading charge-off as cancellation can cause a buyer to overlook a potentially recoverable asset; treating it as automatic permission to collect can create legal, compliance, and reputational risk.
Authoritative Primary Sources
Primary statutory texts, regulatory rules, and official agency guidance supporting this definition:
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