"We Have Written Your Note Off," so What?

I hear much confusion over the phrase many hear from their banker: "We have written your note off!" "Yay!" we hear borrowers exclaim in joy, but why I ask? Perhaps you are unaware of the meaning behind this phrase as it does not help you all that much.

What it means is the bank has entered your note as uncollectible. They have probably ceased accruing interest and have taken the hit on their books.

It does not mean you are free to go, thank you very much. It does not mean they have forgotten about you and your debt, no! It simply means they are recognizing the truth, that this note's a bad note, not performing and, thus, based on FDIC rules and regs, they must write it off.

You still owe the money and that is the confusing part. Just because the bank writes the note off it does not mean that you no longer owe or they cannot collect or proceed against you. It is merely the status of the loan in the bank's books.

This may reduce the collection pressure, but you are far from out of the woods. It may mean you can resolve this matter for pennies on the dollar, but it ain't over yet.

In short, it is not time to celebrate; it is only a bookkeeping entry and changes reality very little. You owe, you owe, you owe. Nothing has really changed. When you hit the lottery, the bank will be there with its hand out...yes, collecting for the written off note.