A credit charge-off appears on a credit report when the initial creditor essentially gives up on being paid and removes it from the company's account balance sheets, according to Bankrate. However, this does not mean that the debt is gone or does not have to be paid. It is possible for the initial creditor to sell the debt to another collection agency or continue trying to collect the debt as long as the debt is within the state's statute of limitations.
Most states allow creditors to collect on open-ended credit accounts for 3 to 6 years, but some states, such as Rhode Island, have longer statutes of limitation, according to Bankrate. However, it is important to understand that the statute of limitation is only applicable if the creditor wants to pursue collecting the debt through the legal system. Creditors can technically continue to call or mail the debtor to collect on the debt even after the time frame that the courts can intervene has passed.
Charge-offs should still be paid, as they can have a negative effect on the debtor's credit score. They indicate that the debtor has a history of leaving open debts over a long period of time, which indicates a substantial credit risk.