What does the term charged off mean?

A "charge off" is an account that a creditor deems as "uncollectable" and thus is placed into the "charged off" category meaning they are no longer going to attempt to collect funds on it. This doesn't mean that they are necessarily unable to try to retrieve the funds still or can't sell the debt to someone else to collect funds, but generally they don't. What it means to the debtor is that a negative mark is placed on their credit report and future creditors will see the charge off as irresponsibility on the debtor's behave and, thus, will have a higher likelihood of refusing credit. The below expands on this frequently confused idea...although it was originally written for a slightly different question concerning taxes. IMPORTANT CONCEPT: CHARGE OFF IS AN ACCOUNTING ENTRY BY THE ONE OWED, IT IS NOT FORGIVENESS OF DEBT. Explanation Charge Offs & Forgiven Debt below is more than everything you ever wanted to know, but feel free to ask more or challenge any of my answer. Lets limit this to business charging off a debt that is owed to them through some type of transaction. that includes the $ provided by a Cr Card co as a transaction. A charge off (or write off) is the accounting process where a business acknowledges a receivable (an asset) it believes is uncollectable effectively does not exist. It is taking the cost of not collecting that receivable as a charge against current earnings. Hence the companies net current earnings is lower than they would have been and subsequently, the amount of income taxes they pay is also lower. IMPORTANT: It does not mean the debt is forgiven, just that they can