Write Off/Charge Off Loan Process

Steps for charge off follow the "Write off Process" section.

Write Off Process

Several things happen when a loan is written off:

  1. The principal amount of the loan is debited from the loan allowance G/L account (such as 719.xx).

  2. The principal balance of the loan is credited to the original loan G/L account (such as 701.xx).  (This G/L account is from the loan Category Definition)

  3. The interest due on the loan is credited to the interest due G/L account (such as 781.xx or the “Accrued interest” G/L acct from Loan Category Definition) and is debited to the corresponding income account (such as 111.xx or the “Interest earned” G/L acct from the Loan Category Definition).

  4. The loan category changes to the “Loan category for write offs” from the Loan Category Definition

  5. The write-off indicator is changed from 0 to 1 (written-off loan).

  6. The Interest Calc Code changes to 2.

  7. The Review Date field will show a description of “Write Off Date” in account inquiry and the date updates to the current date.

  8. The Statement mail group, 3rd -party opt out, and CU contact fields are updated (if applicable).

  9. The credit report codes are updated (if applicable).

  10. The payment matrix is updated to the following:  Principal 1, Interest Due 2, Fine Amount 3.

  11. A system-generated Tracker conversation is created to document the write off.

  12. The delinquency fine control is updated (if applicable).

  13. The freeze code is updated (if applicable).

  14. Maintenance is performed to the credit card loan (if applicable).

  15. Maintenance is performed on variable rate tables (if applicable).

  16. The member is added to the blocked persons list (if applicable).

  17. On member inquiry screens, the loan account will be highlighted on the screen and the description changes to the description for the new loan category (e.g., “Loans in Collection” or “Written Off”). A comment will also be added indicating the date the loan was written off.

  18. Additionally a snapshot is taken of the data, and this is saved to the LNWRTOFF file.

The Loan Category changes to a category specifically configured for written off loans. The category will not accrue interest, but will continue to track the delinquency status of the loan. IMPORTANT:The loan category that the loan is written off to is determined by the "loan category write offs" field in the original loan category configuration. This category does not have to be 99, but can be any loan category configured for the use of writing off loans.

NOTE: When you write off a loan, the text LN WRITEOFF followed by the account number will appear in the transaction description in your General Ledger.

NOTE: If the account was flagged to be excluded from dormancy on the third write off screen, this will occur during EOD/BOD processing.

 

Charge Off Process

Several things happen when a loan is charged off:

  1. If the loan has not been written off, the process will follow the write- off process. (See above.)

  2. Miscellaneous maintenance as specified by the charge-off screen will occur, and a Tracker record will be created for the charge-off.

  3. Additionally a snapshot is taken of the data, and this is saved to the LNWRTOFF file.

  4. Then the system will process an account-adjustment transaction for the amount of the loan balance (principal plus accrued interest): Origin 08/Tran Type 82/Tran Code 24

  5. The result of this transaction will be G/L entries that both DB/CR the 719.xx G/L account.

  6. The account is then closed. After EOD is run, it will reside in the closed accounts list.

  7. The member will be added to the blocked persons list (if applicable).

  8. NOTE: If the account was flagged to be excluded from dormancy during charge off, this will occur during EOD/BOD processing.