Anyone can have trouble with money, and it can be stressful when credit card bills start to add up. But you can find ways to handle your debt. Credit card companies will sometimes work with people who owe money to find ways to get it paid off. Also, it’s not common, but your credit card debt might be forgiven.
The first step to getting rid of debt or having it canceled is to learn more about it. First, let’s talk about the chance of getting rid of credit card debt.
Credit Card Debt Forgiveness – Is It Real?
Credit card forgiveness programs do exist. In credit card forgiveness, some or all of a borrower’s credit card debt is cleared, the amount is no longer due and no longer needs to be paid back to the credit card company. A personal or student loan debt is another type of debt that could be forgiven.
How Does The Credit Card Debt Forgiveness Program Work?
The program does exactly what it says it will do. The creditor agrees to forgive a portion of your credit card debt if you make a lump sum payment on time This usually happens when the debt settlement company negotiates with credit card issuers to get your credit card debt forgiven, citing your financial hardship.
Let’s say you had $60,000 in credit card debt. If you qualify for the credit card debt forgiveness program (often known as the debt settlement program), you will pay back $30,000 within a specific time. For sure, the credit bureaus will notice that you have not made the full payment, and they will penalize you with a lower credit score. However, on the plus side, potential creditors will be happy to see that you’re working to reduce your debt.
Remember that if your account is already past due, it will affect your credit score. Once the debt settlement is complete, the account will be marked as paid as settled. If you have a good relationship with your creditor, you may request them to update your credit report as “paid as agreed” or “paid in full.” A “paid in full” account status doesn’t hurt your credit score.
Who qualifies for the credit card debt forgiveness program?
You can qualify for the credit card forgiveness program if:
- Your creditor must be on the list of banks, law firms, debt collectors, or creditors who decided to participate in the program.
- You have to have not made a payment on your account in over 120 days.
- You are in financial hardship and that is why you can’t make the full payment.
- You need to pay the agreed-upon amount within the specified time. You can’t take extra days to pay off debt.
- If you miss even one payment, the creditor will end the program. The outstanding balance will return to the original amount minus the amount you’ve paid.
- Remember that any amount refunded over $600 is taxed as income.
What are your other alternatives to it?
Apply for Debt Consolidation Loans
This debt relief option lets you make one monthly payment instead of several. Most of the time, debt consolidation means getting a new loan with a lower interest rate than the one you’re paying now. This lowers the amount you owe each month.
There is yet another way to consolidate debt. You can enroll in a debt consolidation program wherein creditors agree to lower your interest rate and arrange an affordable repayment plan. You make monthly payments for 3-5 years (depending on the debt amount).
If settling your credit card debt doesn’t help, you might need to talk to a bankruptcy lawyer. Yes, bankruptcy will hurt your credit score and short-term ability to borrow money, but if you have no other choice, it can help you quickly get out of credit card debt. If you file for bankruptcy, you can clear all your debts. This would let you start over with your finances.
Set Up A Repayment Plan
Get in touch with your credit card issuer and try to work out a deal that works for both of you. This could include options for forbearance, which lets you briefly put off making your payments to get some relief without hurting your credit.
Go for Credit Counseling
A credit counseling agency can help you make a plan to pay off your debts or handle them better. These plans are made for you and might not cost you anything. Not only does credit counseling help you with your bills, it does more. In addition to creating a money management plan based on your wants and income, a credit counselor can teach you how to make a budget.
Enroll in a Debt Management Plan
In a debt management plan, credit counselors offer you a budget plan to manage your income and expenses. Furthermore, they negotiate with your creditors for a repayment plan at a lower interest rate.
Note: You may or may not have to pay a fee for credit counseling services. But in the case of a debt management plan, you get a structured repayment plan, and you have to pay a monthly fee for that.
Credit card forgiveness programs only partially eradicate your debt. You have to pay some portion of the debt. So, you still need to save some amount. But you can only qualify for it when you are in financial hardship. So make sure you arrange all the relevant documents to prove it.
Attorney Loretta Kilday has over 36 years of litigation and transactional experience, specializing in business, collection, and family law. She frequently writes on various financial and legal matters. She is a graduate of DePaul University with a Juris Doctor degree and a spokesperson for Debt Consolidation Care (DebtCC) online debt relief forum. Please connect with her on LinkedIn for further information.