Charge-off

Operational Use Cases

• Final closure of unrecoverable loans: After all recovery avenues are exhausted, write off the balance and close the loan.
• Debt sale / agency transfer: Loans sold to third parties often need to be written off internally.
• Compliance-driven clean-up: Regulators may require loans to be written off after a set period even if charge-off already occurred.

Applies to both Fixed and Dynamic repayment schedule engines. Interest recalculation (if enabled) ensures outstanding amounts and accruals are correct before closure.

Lifecycle Snapshot

flowchart LR
    A[Confirm write-off approval] --> B[Submit writeoff command]
    B --> C[Loan moves to Closed – Written Off]
    C --> D[Accruals reversed and GL entries posted]
    D --> E[Record any recoveries with recoverypayment]

API Playbook

1. Execute write-off

   HTTP

   POST /v1/loans/{loanId}/transactions?command=writeoff
   {
     "locale": "en",
     "dateFormat": "dd MMM yyyy",
     "transactionDate": "15 Sep 2025",
     "writeoffReasonId": 6,
     "note": "Debt sold to XYZ Agency",
     "externalId": "WO-2025-09-15-XYZ"
   }

   Validations:

   • Loan must be Active or charged-off (depending on product configuration).
   • transactionDate cannot be in the future, and no later user transactions may exist.

2. Post-write-off handling

   • Loan status moves to WRITTEN_OFF. Embarc stops accruals and closes the account.
   • Use POST /transactions?command=recoverypayment for any amounts recovered after write-off; these are tracked separately.

Tips for Operations Teams

• Capture the write-off reason and external reference (e.g., debt sale contract) in the note for audit trails.
• Writing off an account cannot be undone; if a reversal is absolutely needed, coordinate with technical support to reverse the transaction and re-open the loan.
• Ensure collateral releases and customer notifications align with your legal obligations after the write-off posts.

Baseline Example (Fixed Loan A)

After charge-off, collections decides to write off the remaining USD 6,179.05 on 10 Jul 2026.

Transactions created

Loan summary delta

Any unpaid interest/fees should be included in the write-off amount if present. In this baseline scenario they were already cleared.

Accounting snapshot

The write-off command always zeroes the balance and closes the loan, regardless of the charge-off behaviour setting. Any configuration on that setting affects the earlier charge-off event, not the write-off itself.