At a Glance

Credit card debt forgiveness is when your credit card company “forgives” your debt. In other words, you no longer have to pay what you owe. However, creditors often won’t forgive all of your outstanding balance, and there can actually be some negative implications to having your debt forgiven.

In this article, you’ll learn:

Who qualifies for credit card debt forgiveness?

Technically, anyone qualifies for credit card debt forgiveness. But you should only consider it if:

  • You’re in so much credit card debt you’re unable to make payments.
  • You’re being penalized with late fees.
  • Your account has been sent to collections.
  • Your credit score is already suffering.

If you still have a good credit score and want to try to pay off the debts, you should first consult a credit counseling agency for assistance.

Credit card debt forgiveness pros and cons

While credit card debt forgiveness sounds like a dream, it certainly has its advantages and disadvantages.


  • You won’t have to repay all of your outstanding debt, which can help relieve some financial burden.
  • You can start rebuilding credit without debt.
  • Helps you avoid bankruptcy.


  • Your credit score will suffer, and the debt collection negative mark will stay on your credit report for seven years, affecting your ability to get a loan, new credit card, buy a car, rent an apartment, etc.
  • You may have to pay taxes on any debt relief savings.
  • Creditors aren’t required to negotiate or settle your debt, and instead they could take you to court or turn your account to a collection agency, which could cost you more money.

Getting out of credit card debt without a credit card forgiveness program

Now that you understand the good and bad of debt forgiveness, it’s important to explore some other options.


Try to negotiate with your credit card company and decide on an amount of debt you can realistically repay-either immediately as a lump sum, or in increments over time. The remaining debt is forgiven.

Statute of limitations

The statute of limitations for debt collection varies by state (typically 3-15 years), but you could avoid paying if the statute has expired. Then, a debt collector can no longer use a court to enforce their collection and doesn’t have a claim to the money.


While consolidating your debt doesn’t change your principal balance, you could save money on interest. There are a few different methods of consolidation to consider.

Balance transfer

Move the balance from overdue credit cards to a new credit card, particularly one with 0% intro APR. This gives you time to pay down the debt without accruing new interest.

Personal loan

If you qualify, you could take out a personal loan large enough to pay off your debts. You may be able to get a lower interest rate than your credit card, which can help save you money.

Home equity loan

Use your home’s value as collateral for a loan to pay off your debt. Though, you could potentially lose your house if you don’t repay the loan.


It’s possible to negotiate with a debt collection agency to determine whether you pay a lump-sum or make reduced payments. Be sure to get your repayment plan in writing and don’t make any payments before you do.

Consult a credit counselor

Most of the time, you can get a free consultation. Counselors may also offer education and materials to help advise you on how to manage your money and debt-plus, develop a budget.

File for bankruptcy

This should be your last resort, as it could have serious consequences. You can file under Chapter 7 and liquidate your assets, or Chapter 13 where you could keep some of your property. The court controls the settlement amount and determines how much you must pay. Depending on which type of bankruptcy you claim, it can stay on your credit report for 7-10 years.

Tax consequences of debt relief

In some cases, any money you save from debt relief can be considered taxable income. You’ll have to report savings to the government via a 1099-C form and pay taxes on it the following year. You should consult a tax attorney for help.

Debt relief scams: Credit card debt forgiveness programs to avoid

Avoid doing business with debt settlement companies that promise to settle your debt if you encounter any of these red flags:

  • Pre-settlement fees
  • “New government programs”
  • Guarantee that they can make all your debt disappear
  • They tell you to stop communicating with creditors
  • They claim they can stop debt collection
  • Guarantee that your debt can be paid off for minimal amounts.1