I’ve gotten myself into a bit of a financial bind for various reasons, all my own doing. I plan to save up over the next 60 days and do my best to avoid further trouble, but I’m considering whether it makes sense to let my bank account, which is overdrawn by $1,650, be charged off and reported to Chex instead of digging myself deeper into debt. I already have another account with Truist, and Citizens Bank is strict with their 60-day charge-off policy, even if I continue making payments. A representative reassured me that this charge-off wouldn’t affect my credit, which is my main concern. While I plan to pay it off eventually, I’m wondering if letting it go to Chex for 5 years is the “best option,” considering I already have a functional account. I understand a negative mark on Chex isn’t good, but since I’m not in urgent need of a car loan or a mortgage (and unsure if those would even be affected), should I just let it happen and potentially settle it later?
You can borrow money from your own 401(k) and spread out the repayment period for as long as necessary if you have one. Next, settle the bank debt. You could be closed out of your other bank account at any time for any cause. Everything worked out well when I once left a debt at a credit union and continued banking with my other bank. However, if the banks refuse to work with you and your bank, which you believe to be reputable, decides to close your account, things could go awry.
I appreciate your response; I was considering it but ultimately decided against it. I am aware that I must take action; in the worst scenario, I will just pay the outstanding balance, have it recorded as paid, then write Citizens a hopeful goodwill reversal letter if I am unable to pay it in full within 60 days. I’m not entirely sure what Chex’s implications are because I’m reading contradictory responses here, but from what I’ve researched, it sounds like I would have problems creating a new account in the event that my current one went wrong.
I fail to see why you would object to it. This is by far the best option, short of winning the lotto, if your 401(k) has the money.
Is it possible to receive a personal loan to cover the overdraft? From your other bank, perhaps? The installments on a 12-month loan would be quite low if you could secure one.
Do you really want to lose your bank account because of $1,650?
Thank you for your response. To be honest, I’m only thinking about the end of the world, but I’ll do my best to avoid becoming unbankable. With any luck, we can work out a payment schedule that doesn’t actually require me taking out a loan.
A charge-off does impact your credit, so you’ve been misinformed.
Typically, after a charge-off, the process goes like this: they attempt to collect the debt internally for 2-6 months, then send it to collections. After that, they may either sue you or do nothing, but the charge-off will remain on your credit report for 7 years, starting from the “Date of Last Activity” (DLA).
They’ll check your assets to determine how collectible you are (looking at money in your bank, property, or wages for garnishment) to decide whether or not to sue. Some companies sue for as little as $200, while others never sue. It also depends on your statelike in New Jersey, they frequently sue for small debts.
You have about a 20% chance of being sued for each debt, and it’s probably higher for an overdrawn checking account. Since banks take these seriously, I’d prioritize paying off that one first.
Thank you for your response. I’m going to do my best to resolve the checking account before the 60-day deadline. I’d hate to put money towards it only for it to be charged off anyway if I can’t fully cover it, leading to it being reported to Chex. I’ll call another representative today, but the one I spoke with firmly stated this would only be a Chex issue and wouldn’t affect my FICO credit score, as they’re separate. The banker at Citizens said the same, and for some reason, that reassures me more, even though it might be silly. Even if I end up having to pay off the remaining balance and deal with the Chex mark, I plan to clear it up and try to have it removed or reversed through in-person communication or a goodwill deletion request.
That might be accuratesome banks may have a policy not to report past due checking accounts to credit bureaus, but many common banks do report it.
I’d suggest aiming for a lump-sum settlement instead of making monthly payments unless you’re absolutely certain you can meet every payment. If you miss a single payment, the settlement could be voided, and those payments would just go toward the original balance. So, only agree to a settlement plan if you’re 100% sure you can stick with it.
Additionally, you could be able to obtain a terrible auto loan with exorbitant interest, but you won’t be able to obtain a mortgage if there is any bad credit reporting. I have to deal with this every day. I might be able to help my clients get a mortgage if it was a school loan, but not if it was another kind of debt.