Myth.  Many people see on their credit report that a debt has been “charged off” and believe they no longer owe the debt.  That belief is incorrect, and can cost you money.  A bank can still send a “charged off” debt to collections, sell the debt to another company, or even sue you for the amount owed.
 
Why is this? Because banks use the “accrual method” of accounting, which allows them to count income when it is earned and not received.  For example, credit card banks are allowed to count as income the interest that is due from a consumer, even if not yet paid.  When you stop paying on a debt, and enough time has gone by that it’s clear you are in default, the bank then “charges off” and stops counting as income the interest which it earned but did not receive.
 
A debt being “charged off” has nothing to do with you being off the hook for the debt.  You still owe the debt, and unless the Statue of Limitations (which determines whether a debtor can collect on  a debt) has passed, it is highly likely that the bank will do whatever it can to recoup what you owe.  If you file a Chapter 7 Bankruptcy Petition, make sure you list all debts that appear on your credit report, including ones that say “charged off,” because you are still responsible for those debts.

If you're in the San Francisco Bay Area and need a bankruptcy attorney, the Law Office of Mauricio Ramos is always happy to help.