What does it indicate if a debt is categorized as "charged off"?

When a debt is categorized as "charged off," it indicates that the creditor has determined that the likelihood of collecting the debt is minimal. This typically occurs after a borrower has become significantly delinquent on their payments, usually after six months of non-payment. Charging off a debt allows the creditor to mark it as a loss for accounting purposes, which can help them with tax deductions.

While a debt may subsequently be sold to a collection agency or the debtor may have declared bankruptcy, the "charged off" classification specifically signifies the creditor's stance on the recoverability of the amount owed. The creditor acknowledges that they are unlikely to receive payment, but it does not automatically imply that the debt is resolved or that the debtor has undergone bankruptcy proceedings.