Author Topic: Default - Charge off - Bankruptcy  (Read 2943 times)

AmCap

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Default - Charge off - Bankruptcy
« on: January 23, 2013, 08:42:39 AM »
Can anyone make any sense of when LC moves a note from Late to Default, and then from Default to Charge off?  Also, why is it that some loans stay out of default or charge off status even when the borrower filed for bankruptcy, in some cases months ago? 

Confused....

Zach

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Re: Default - Charge off - Bankruptcy
« Reply #1 on: January 23, 2013, 09:47:28 AM »
Can anyone make any sense of when LC moves a note from Late to Default, and then from Default to Charge off?  Also, why is it that some loans stay out of default or charge off status even when the borrower filed for bankruptcy, in some cases months ago? 

Confused....

I think that usually a loan goes into default after 120 days of non-payment. From default to charge off, it can vary significantly - but always after 120 days and when collections person feels that the chance of recovery is low.

With bankruptcies its trickier because they're waiting for a hearing most likely to determine if any payments will be made on the debt - they're not usually fast moving.

rev

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Re: Default - Charge off - Bankruptcy
« Reply #2 on: January 23, 2013, 01:43:52 PM »
Also, AFAIK, you can't charge off an account unless it's 180 days delinquent. In some cases you may have a payment that brings the account one delinquency cycle up, so the 6 months are not necessarily 6 calendar months after it hit Late 16-30. On top of that, normally the charge off procedure runs only once a month, at the end of the accounting cycle.
In case of BKs, depending on the chapter and the type of debt, you may be able to charge off the account as soon as the court discharges the obligor.

yojoakak

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Re: Default - Charge off - Bankruptcy
« Reply #3 on: January 23, 2013, 01:52:58 PM »
It's an automated process, one that doesn't always make a lot of sense. I believe they just compare where the loan is with where the loan should be without paying any attention to what's actually going on with the loan.


For example, I had a loan where the borrower stopped making payments for 6 1/2 months. It went into Default.

But then the borrower started making regular payments again.

So this loan would flip from Default to Late when a payment came in and then 2 weeks later it would flip back into Default, because of course they were "more than 6 months behind" again.

This went on for months. (It gets extra confusing because when a loan is in Default, the interest stops accruing.)


And you can forget about the "Last Payment" field on the Loan Performance page. If a borrower missed a payment 2 years ago but has made every payment since it will claim the borrower hasn't made a payment in 2 years! e.g. https://www.lendingclub.com/account/loanPerf.action?loan_id=624713&order_id=2202536&note_id=3118416



yojoakak

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Re: Default - Charge off - Bankruptcy
« Reply #4 on: January 23, 2013, 01:55:32 PM »
Also, AFAIK, you can't charge off an account unless it's 180 days delinquent. In some cases you may have a payment that brings the account one delinquency cycle up, so the 6 months are not necessarily 6 calendar months after it hit Late 16-30. On top of that, normally the charge off procedure runs only once a month, at the end of the accounting cycle.
In case of BKs, depending on the chapter and the type of debt, you may be able to charge off the account as soon as the court discharges the obligor.

Here's a loan that got Charged Off 3 months after the most recent payment.

So someone needs to define what terms like "XYZ days delinquent" REALLY means.


https://www.lendingclub.com/foliofn/loanPerf.action?loan_id=489477&order_id=2519471&note_id=1287249

From Payment History:
"8/12/12 8/15/12 $0.86 $0.67 $0.19 $0.00 $8.16 Received - Partial Payment"

From Collection Log:
"10/30/12 (Tuesday)    Charged off. PAYMENT 120+ past due. Collections efforts exhausted. Recovery unlikely"


« Last Edit: January 23, 2013, 02:00:03 PM by yojoakak »