Legal Question in Credit and Debt Law in Indiana

What Creditors mean by internal write off

When a creditor says they have taken an account and done an: internal write-off. Does that mean that they then deduct the owed amount off of their taxes?

Asked on 3/06/07, 12:35 pm

1 Answer from Attorneys

C. David DuMond Law Offices of David DuMond

Re: What Creditors mean by internal write off

A lender's write-off has no legal meaning for the debtor, who owes the entire amount due whether or not it is written off. Banks and other lenders list the value of loans they make to people as "assets" on their balance sheet. To accurately portray their financial condition, when a loan is in default for more than a few months, the bank must "write off" the loan. This means the loan must be deducted from the asset side of the balance sheet. Often this "write off' has to be deducted from current income, and when this happens, a lender is sometimes inclined to accept less than full payment in satisfaction for the debt, because everything received will be treated as income.

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Answered on 3/06/07, 2:47 pm

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