If a creditor writes of a debt as a bad debt what happens next?

Even if a creditor writes off a debt, you still owe the money, it only means that they do not think you will pay or they have waited the maximum allowed time under Generally Accepted Accounting Principles.

Depending on the type and size of this creditor they can take three typical options; (1) do nothing; (2) Issue you an IRS Form 1099 making you responsible to pay income tax on the amount they are writing off; (3) sell all their bad debts, typically quarterly, to specialized and aggressive charge-off debt collections agencies and law firms.