by Randy Carey:
Charging off a loan does not alter the legal obligation between the borrower and the bank. All payments must be applied to the loan according to the legal obligation whether the loan is charged-off or not. All payments received, regardless of whether it represent principal or interest are credited to recoveries up to the amount of the original charge-off amount.
by Richard Insley:
...and it's hard to imagine any promissory note that calls for payments to be applied to principal ahead of interest and fees.