Who qualifies for credit card debt forgiveness? (2024)

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MoneyWatch: Managing Your Money

Who qualifies for credit card debt forgiveness? (2)

The use of credit cards is commonplace in the United states. The average American has 3.9 active credit cards in their wallet, according to Experian. While credit card usage is common, it can also be easy to let your balances grow out of control against a backdrop of persistent inflation. And, that can lead to financial struggles.

If you're dealing with mounting credit card debt, it's wise to address that debt as quickly as possible. But what can you do if you have too much credit card debt and can't afford to make your minimum payments? Credit card debt forgiveness may be an option. But, who qualifies for forgiveness?

Get access to the credit card debt relief you need now.

Who qualifies for credit card debt forgiveness?

When it comes to credit card debt forgiveness, you may think there are government programs that help get rid of debt. Unfortunately, there is no such thing as a government-sponsored program for credit card debt relief. In fact, if you receive a solicitation that touts a government program to get you out of debt, you may want to think twice about working with that company.

But the good news is that credit card debt forgiveness does exist — it's just not government-sponsored. While it's highly unlikely that any credit card company will forgive 100% of your debt without it being part of a bankruptcy, you may be able to negotiate a settlement with your lenders in which they forgive a percentage of the balance you owe. Moreover, nearly anyone who has a hard time making their credit card payments may qualify for forgiveness.

How to get your credit card debt forgiven

There are a couple of ways to get your debt forgiven by credit card companies. Those include:

Debt settlement programs

Debt settlement programs are a type of debt relief service. At the start of the program, a debt relief expert will typically analyze your debts and financial position. Using this information, the expert will create an affordable, effective payment plan.

When you make your payments to the debt settlement company, they generally hold the money in a special-purpose savings account. Once you've saved enough money to settle your debts, the debt settlement company starts negotiating with your creditors in hopes of reducing your principal balance. These negotiations are often successful, resulting in significant long-term savings.

But there are some potential disadvantages to think about before signing up for one of these services. For starters, debt settlement companies do not make payments to your creditors as you save for your settlement. That will likely hurt your credit score and impact the ability to borrow for some time.

Moreover, there's no guarantee that your credit card company will accept the settlement. If they don't accept it, you could end up with a larger debt burden than you started with, and if they do, you'll likely need to pay income taxes on the amount of debt that was forgiven.

Find out how a debt relief service can help you now.

Bankruptcy

If credit card debt settlement doesn't provide enough relief, it may be time to reach out to a bankruptcy attorney. Sure, bankruptcy will likely harm your credit score and ability to borrow in the near term, but as a last resort, it's oftenan effective way to get out of overwhelming credit card debt. You may be able to get your debt 100% forgiven through bankruptcy, giving you the ability to restart on a clean financial slate.

Debt forgiveness may not be your only option

Debt settlement programs and bankruptcy both have the potential to result in forgiven debt, but they're also likely to have a significant impact on your credit score and your ability to borrow. But there are other options to consider, too, including:

  • Debt consolidation loan: You may be able to take out a debt consolidation loan to consolidate your credit card debts at a lower interest rate. These loans usually come with fixed payment schedules, offering a clear path to payoff.
  • Use your home equity: Home equity is a relatively inexpensive way to access cash when you need it, and the average American homeowner has quite a bit of it. You may be able to tap into your home's equity to consolidate your credit card debts at a lower interest rate.
  • Debt consolidation programs: Under these programs, debt relief experts use your financial data to negotiate better terms with your lenders and create payment plans to help you pay your debts off faster.
  • Financial hardship programs: Many credit card companies offer financial hardship programs that could offer relief through lower interest rates and fixed payment terms. Signing up for these programs is often as simple as calling your lenders and asking for help making your payments more manageable.

The bottom line

Credit card debt can be overwhelming, but you don't have to deal with it forever. If debt consolidation loans are unavailable and debt consolidation programs don't offer enough relief, it may be wise to use a debt settlement company to try and get a percentage of your debt forgiven. But if debt settlement doesn't provide enough relief, it may be time to file bankruptcy and restart on a clean financial slate.

Joshua Rodriguez

Joshua Rodriguez is a personal finance and investing writer with a passion for his craft. When he's not working, he enjoys time with his wife, two kids, two dogs and two ducks.

Who qualifies for credit card debt forgiveness? (2024)

FAQs

Can credit card debt be forgiven? ›

Most credit card companies won't provide forgiveness for all of your credit card debt. But they will occasionally accept a smaller amount to settle the balance due and forgive the rest. Or the credit card company might write off your debt.

Does the government have a credit card debt relief program? ›

Unfortunately, there is no such thing as a government-sponsored program for credit card debt relief.

Is there a debt forgiveness program? ›

The Public Service Loan Forgiveness (PSLF) program forgives the remaining balance on your federal student loans after 120 payments working full time for federal, state, Tribal, or local government; the military; or a qualifying non-profit. Learn more about PSLF and apply.

Are banks really writing off credit card debt? ›

Typically, a credit card company will write off a debt when it considers it uncollectable. In most cases, this happens after you have not made any payments for at least six months. However, each creditor has a different process for determining whether a debt is uncollectable.

How can I legally get rid of my credit card debt? ›

Chapter 7 bankruptcy: This fairly quick legal process can wipe out your unsecured debts through what's called a “discharge.” Chapter 13 bankruptcy: Chapter 13 can also result in a discharge, but typically only after you complete a 3-5 year repayment plan.

How can I legally avoid paying credit card debt? ›

If you want to know how to stop paying credit cards legally, that could be tackled with debt settlement programs or filing for bankruptcy.

Can I get a government loan to pay off debt? ›

While there are no government debt relief grants, there is free money to pay other bills, which should lead to paying off debt because it frees up funds. The biggest grant the government offers may be housing vouchers for those who qualify. The local housing authority pays the landlord directly.

What is the credit card forgiveness program? ›

Credit card debt forgiveness is when some or all of a borrower's credit card debt is considered canceled and is no longer required to be paid. Credit card debt forgiveness is uncommon, but other solutions exist for managing debt. Debt relief and debt consolidation loans are other options to reduce your debts.

What is the American Debt Relief Program? ›

American Debt Relief uses a process known as debt settlement to help consumers erase debt after paying a fraction of what they owe. After talking with a debt consultant during a free debt assessment, customers are asked to begin saving a set amount of money in a dedicated savings account each month.

How legit is national debt relief? ›

National Debt Relief is a legitimate company providing debt relief services. The company was founded in 2009 and is a member of the American Association for Debt Resolution (AADR). It's certified by the International Association of Professional Debt Arbitrators (IAPDA), and is accredited by the BBB.

Does debt forgiveness ruin your credit? ›

Credit card debt forgiveness could hurt your credit

You stop making payments to your creditors as you save for your settlement. Creditors typically report the debt as "settled" rather than "paid as agreed" on your credit report once it's paid off. This shows that the creditor wasn't able to collect on the full debt.

Can I ask my creditors to write off my debt? ›

Asking a creditor to write off your debts is successful in some cases and not in others. It is not right for everyone. It is important to speak to a qualified debt adviser about your circ*mstances and all your options.

How to pay off $10,000 credit card debt? ›

7 ways to pay off $10,000 in credit card debt
  1. Opt for debt relief. One powerful approach to managing and reducing your credit card debt is with the help of debt relief companies. ...
  2. Use the snowball or avalanche method. ...
  3. Find ways to increase your income. ...
  4. Cut unnecessary expenses. ...
  5. Seek credit counseling. ...
  6. Use financial windfalls.
Feb 15, 2024

What happens to unpaid credit card debt after 7 years? ›

After seven years, unpaid credit card debt falls off your credit report. The debt doesn't vanish completely, but it'll no longer impact your credit score. MoneyLion offers a service to help you find personal loan offers based on the info you provide, you can get matched with offers for up to $50,000 from top providers.

What debts Cannot be forgiven? ›

Filing for Chapter 7 bankruptcy eliminates credit card debt, medical bills and unsecured loans; however, there are some debts that cannot be discharged. Those debts include child support, spousal support obligations, student loans, judgments for damages resulting from drunk driving accidents, and most unpaid taxes.

What happens if you can't pay off credit card debt? ›

If this happens: Your lender will contact you to demand the missing payments are made. Then if you don't make the payments they ask for, the account will default. And if you still don't pay, further action may be taken, such as employing debt collection agents to recover the money you owe them.

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