There seems to be a little confusion when it comes to handling accounts that have been written off by a creditor. I can see why it's easy to mix up 'Written Off' and 'Charged Off' so let me clarify.
Written off accounts basically mean you've neglected to take care of a debt. The creditor realizes that they have little to no chance of collecting so they adjust their accounting records to signify this loss.
Creditors do have the option to outsource to a collection agency but often times avoid doing so. They simply report this on their taxes & receive some sort of credit. A 1099 is then mailed to the consumer which usually eliminates their financial obligation to pay. If you haven't received a 1099, and your credit report has this item listed as 'written off' don't hesitate to ask.
The receipt of a 1099 does require you (the consumer) to pay taxes but that's typically way less expensive than the actual debt itself.
Charged off accounts have not been forgiven. Creditors can sue or outsource to collections. Settlements are the best options for most charged off debt.
The most important thing to remember is that paying off a written or charged off accounts doesn't improve your credit score.
- Akira J. Dixon