Writing off/Charging off a Loan Account (1)
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Screen ID: Screen Title: Panel Number: |
PLNWO-01 Write Off or Charge Off Loan Account 5126 |
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Access this screen by selecting Tool #1006: Write Off / Charge Off Loans.
Helpful Resources
Access the CU*BASE Help for step-by-step information on writing of a loan or writing of an OTB loan.
Write-Off/Charge-Off Tools booklet.
Screen Overview
This is the entry screen used to write off or charge off a loan. Enter an account number and base and press Enter to move to the second write off/charge off screen.
What is the Difference Between a Written-off and Charged-off Loan?
What’s the difference between writing off a loan and charging one off? When it comes to the CU*BASE tracking tools, it’s all about whether the debt is still collectible or not. In a nutshell, writing off a loan reclassifies how it appears in the system but still allows you to collect on the debt through all of the usual channels. It changes the accounting to declassify it as an interest-earning asset. This does not affect the contract itself. The contract is still fully in force. Charging off a loan is done when collectability is extremely unlikely and closes the account and writes off the entire remaining balance against your loan-loss G/L.
The following illustrates the stages a loan would go through before it gets to the final stage of charging off the balance and closing the account:
What Happens When a Loan is Written Off?
When a loan is not longer making money for the credit union or cannot be considered an asset to the credit union, you can “write off” the loan against the allowance reserve account. This is a contra-asset account that represents funds used to offset anticipated loan losses (commonly G/L account 719.00). Writing off a loan does not alter, delete, or in any way change the contract or release the member from his or her obligation to repay the note; it simply reclassifies the loan as a non-income-producing asset.
Learn more about the process a loan goes through when it is written off.
What Happens When a Loan is Charged Off?
If a loan is not already written off, it first goes through the write off process. After this Miscellaneous maintenance as specified by the charge-off screen will occur. Then the system will process an account-adjustment transaction for the amount of the loan balance (principal plus accrued interest. The result of this transaction will be G/L entries that both DB/CR the 719.xx G/L account. The account is then closed. After EOD is run, it will reside in the closed accounts list.
Learn more about the process a loan goes through when it is written off.