If you fail to make payments on your credit card, the credit card company may declare your debt uncollectable. This process is referred to as a credit card debt "write-off" (also called a credit card "charge-off").
Writing off a debt allows a credit card company to report it as a loss and reduce its tax liability. But it does not eliminate your obligation to pay the debt.
When a credit card company decides that it has little or no chance of collecting a debt, it will write it off as a loss. Essentially, a credit card debt write-off is an accounting tool that allows the creditor to declare the debt a worthless asset and deduct it as a loss.
Typically, a credit card company will write off a debt when it considers it uncollectable. In most cases, this happens after you have not made any payments for at least six months.
However, each creditor has a different process for determining whether a debt is uncollectable. As a result, how long it takes before your debt is written off depends on your credit card company, your assets, and your payment history.
Just because the credit card company writes off your debt doesn't mean that you're off the hook. A credit card debt write-off doesn't wipe out your liability for or obligation to pay that debt. It is simply a mechanism used by credit card companies to get bad debts off their books. As a result, debt collectors can still call or sue you to collect the debt even after it is written off.
By writing off your debt, the credit card company gets to deduct it as a loss on its financial statements and tax returns. This lowers the creditor's taxable income and results in a reduced tax liability. Further, since you are still liable for the debt, it can sell it to a debt collector or continue its collection efforts against you.
When a credit card company writes off a debt, it will typically sell it—usually for pennies on the dollar—to a collection agency or other debt collector. Then the collection agency can come after you to collect the debt.
Debt collectors make money by squeezing more payments out of you than what they paid for the debt. As a result, most debt collectors are notorious for repeatedly calling or otherwise pursuing borrowers to collect their debts.
If a credit card company writes off your debt, it will show up on your credit report as a charge-off. Having a charge-off on your credit report usually has a negative impact on your credit score. Further, a charge-off normally stays on your credit report for seven years.
If you need help managing your debts, consider talking to a lawyer.