Terms

  1. Charge-Off – when a debtor defaults on certain types of debts (mainly credit cards and auto loans) the original creditor must “charge-off” the debt within 180 days.  Charging off the debt simply means that the debt is taken off the creditor’s books (account receivable).  In return, the creditor gets a tax deduction for the loss associated with the unpaid debt.  “Charge-off” is simply an accounting and tax exercise.  It does not eliminate or discharge the debt.
     
  2. Default – this term is generally defined by the credit card agreement and typically includes any failure to make regular payment, exceeding your credit limit, failing to carry insurance on an auto, etc.  In general, a “default” means the debtor did something wrong.
     
  3. Debt Buyers – a company that purchases defaulted accounts from creditors and then attempts to collect defaulted accounts. 
     
  4. Statute of Limitations – the Washington statute of limitations on “written contracts” and “accounts receivable” is 6 years.
    1. If no evidence is available to establish a written contract or an accounts receivable, the statute of limitations is 3 years.
       
  5. Garnishment – once a creditor or collection agency obtains a judgment against a debtor, the creditor or collection agency can then apply to the court to garnish funds from bank accounts or pay checks.  If you fail to answer a summons and complaint and a default judgment is issued, then no notice is required to obtain a garnishment.  Therefore, if you fail to answer the complaint, the next time you hear from the creditor/collector may be when money is taken from your account or paycheck.
     
  6. Zombie Debts – debts that the original creditor charged off years ago.  Debts which the debtor thought were dead, but appear again years later when a collection agency or debt buyer starts making collection attempts yet again.