We recommend retaining documents related to a charged off loan for at least four years, and in some cases, for as long as ten years. The IRS requires you to report debt cancellations over $600 on Form 1099-C (or, for some secured loans, Form 1099-A) and imposes a four-year retention period for the form or related data.

In this case, because there is no chance for collection, four years may suffice. However, for other charged-off loans, you may wish to retain documents for a longer period in case your bank later decides to initiate collection proceedings. Because the statute of limitations for written contracts in Illinois is ten years (with some exceptions), you may wish to retain loan documents for ten years after the loan is charged off.

For resources related to our guidance, please see:

• IRS, Form 1099-A and 1099-C Instructions (“Recordkeeping — If you are required to file Form 1099-C, you must retain a copy of that form or be able to reconstruct the data for at least 4 years from the due date of the return.”)

• Illinois Code of Civil Procedure, 735 ILCS 5/13-206 (“Ten year limitation. Except as provided in Section 2-725 of the ‘Uniform Commercial Code,’ actions on bonds, promissory notes, bills of exchange, written leases, written contracts, or other evidences of indebtedness in writing and actions brought under the Illinois Wage Payment and Collection Act shall be commenced within 10 years next after the cause of action accrued; . . .”)