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Debt language can get confusing. This glossary will define the common terms in plain English so you can follow the conversation.
An accounting status a creditor uses after an account is seriously delinquent. A charge-off does not erase the debt. The creditor may still collect, assign it to a collector, sell it to a debt buyer, or sue if the debt is still legally enforceable.
A company hired to collect a debt for another creditor or owner. Collection agencies must follow debt collection rules, and you can ask for validation information when they contact you about a consumer debt.
A company that purchases unpaid debts, often for less than the full balance, and then tries to collect. If a debt buyer sues, it usually must prove that it owns the account and that the balance is accurate.
Information a debt collector provides about the debt, the current creditor, and your rights to dispute. Validation helps you confirm whether the account is yours, who owns it, and whether the amount looks correct.
A court judgment entered because the person sued did not respond or appear on time. A default judgment can lead to collection tools such as wage garnishment, bank levies, or liens depending on state law.
A legal process that allows a creditor with the right court authority to take money from wages or, in some cases, other income. Rules and exemptions vary by state and debt type.
A court decision that says a creditor is legally owed money. A judgment can make collection more serious because it may allow additional enforcement methods.
The time limit for filing a lawsuit on a debt. The deadline depends on state law and the type of debt. A payment or written acknowledgment can restart the clock in some states, so old debts need careful review.
A debt that is too old for a lawsuit under the applicable statute of limitations. A collector may still be allowed to ask for payment in some situations, but suing on a time-barred debt is restricted.
A federal legal process for dealing with debt. Chapter 7 may discharge many unsecured debts, while Chapter 13 uses a court-supervised repayment plan. Bankruptcy rules are technical, so local legal advice matters.
A type of bankruptcy often used to discharge unsecured debts such as credit cards, medical bills, and personal loans. Eligibility can depend on income, assets, exemptions, prior filings, and other facts.
A bankruptcy repayment plan that usually lasts three to five years. It may help with mortgage arrears, car loans, certain tax debts, or situations where Chapter 7 is not available.
Guidance from a nonprofit or counseling agency about budgeting, debt management plans, and repayment options. A debt management plan is different from debt settlement because it usually focuses on structured repayment.
A repayment program often arranged through a credit counseling agency. Creditors may lower interest or fees, but you usually repay the full principal over time.
Negotiating to resolve a debt for less than the full balance. Settlement can create credit damage, tax issues, fees, and lawsuit risk, so written terms and realistic funding matter.
A temporary or structured arrangement a creditor may offer when you cannot keep up with normal payments. It may reduce interest, waive fees, lower payments, or close or freeze an account.
Debt backed by collateral, such as a car loan or mortgage. If payments are not made, the creditor may have rights against the collateral, not just a claim for money.
Debt that is not tied to specific collateral. Credit cards, medical bills, personal loans, and many collection accounts are common examples.
A tax form that may be issued when a creditor cancels or forgives debt. Forgiven debt can sometimes be taxable income, though exceptions may apply. Tax advice is important before assuming the result.
An IRS status that may pause active collection when your income and necessary expenses show you cannot pay. It does not erase the tax debt, and penalties and interest may continue.
A government legal claim against property because of unpaid tax debt. A lien can affect selling, refinancing, or borrowing against property.
A payment plan with the IRS, state tax agency, creditor, or collector. The key question is whether the payment is affordable while you stay current on new obligations.
A collection action that can take money or property, such as funds from a bank account or wages. IRS levy notices and appeal deadlines should be handled quickly.
An IRS program that may settle tax debt for less than the full balance when the taxpayer qualifies under IRS financial standards. It is real, but it is not available just because a balance feels unaffordable.
A company that gathers and reports credit information. The three major consumer credit bureaus are Equifax, Experian, and TransUnion.
A request asking a credit bureau or furnisher to investigate information you believe is inaccurate or incomplete. Strong disputes are specific and include documentation when available.
The percentage of available revolving credit you are using. Lower utilization can help credit scores, especially when balances are reported before the statement closes.
The Fair Credit Reporting Act, the federal law that governs many credit reporting rights, dispute processes, and accuracy obligations.
A collection account that has been paid or settled. The balance should update correctly, but the account may still appear on a credit report unless removed under applicable rules or bureau policy.
A credit card backed by a cash deposit. It can help rebuild credit when used lightly and paid on time, but fees and reporting details should be reviewed before applying.
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