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Can I wipe my credit card debt without paying?

Stack of credit cards on account of value in red
There are a couple of ways to wipe out your credit card debt without paying, but there may be better options to consider instead. Getty Images

Many Americans are feeling the financial squeeze from multiple directions right now. For starters, stubbornly high inflation, which is currently running at around 3.5%, has driven up the cost of essentials like food, housing and energy. And, the Federal Reserve has been keeping its benchmark rate at a 23-year high in an effort to get inflation under control, which is causing consumer borrowing rates to be elevated, too. This high-rate environment has, in turn, made borrowing more expensive for things like mortgages, auto loans and credit cards.

For households that are already struggling to make ends meet, this combination of high inflation and elevated interest rates can have a severe impact. When the bills keep piling up but income isn't keeping pace, it can lead you to turn to credit cards as a stopgap just to cover basic living expenses. And, before you know it, you've racked up substantial credit card balances that become increasingly difficult to pay down as the interest charges compound.

It's no wonder that in this difficult economic environment, those who are saddled with mounting credit card debt may start looking for any lifeline or innovative way to get out from under that burden. And, some may even go so far as to explore the possibility of wiping out their credit card debt entirely without paying what they owe. But is that really possible? And, if so, what are the potential consequences?

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Can I wipe my credit card debt without paying?

The short answer is yes, there are a couple of ways you can technically get out of paying your credit card debt entirely. However, these options come with major downsides and should really only be considered as an absolute last resort. That said, your options for doing so include:

Filing for bankruptcy

The most straightforward way to have your credit card debt legally forgiven is to file for bankruptcy. When you file for Chapter 7 bankruptcy, commonly known as liquidation bankruptcy, your assets above certain exempt amounts are sold off to repay as much of your debt as possible. Any remaining unsecured debts, like credit cards, are then discharged, meaning you are no longer legally obligated to pay them.

While this allows you to start with a clean slate, the bankruptcy itself will remain on your credit report for seven to 10 years, making it extremely difficult to get approved for new credit or loans during that time. It can also limit your housing options or make it harder to get hired for certain jobs. Those types of consequences should make bankruptcy the last option for many people.

Find out what the right debt relief solution is for you now.

Opting for debt settlement or debt forgiveness

Another potential option to wipe out credit card debt without paying the full amount is to negotiate what's known as a debt settlement with your creditors. In this process, you stop making monthly payments and instead negotiate with the credit card companies — either directly or through a debt settlement company representing you — to pay a lump sum that is less than the full balance in exchange for them forgiving the remaining amount.

This option won't allow you to wipe away your credit card debt completely without paying anything out of pocket. That said, creditors are sometimes willing to accept these reduced payoff amounts, especially if you demonstrate a true inability to pay and the debt has gone into default status. 

The catch is that the forgiven portion of the debt is treated as taxable income, so you'll likely owe income taxes on that portion of your debt. You'll also typically see a negative impact on your credit score, which will make borrowing more difficult and expensive in the future.

Other options for wiping your credit card debt

Outside of bankruptcy or debt settlement, there are really no other ways to completely wipe away credit card debt without paying. Making minimum payments and slowly chipping away at the balance is the norm for most people in debt, and that may be the best option in many situations. 

However, there are some alternatives that can provide temporary relief and get you on a path to paying off the debt in full. These include:

  • Debt management plans: When you enroll in a debt management plan, the debt relief agency you work with may be able to negotiate lower interest rates, waived fees or alternate payment plans with creditors on your behalf. This can make the debt more manageable to pay off in full.
  • Debt consolidation loans: Debt consolidation loans allow you to combine multiple credit card balances into one new fixed-rate loan, ideally with a lower interest rate than the cards. You still pay the full principal, but the savings on interest can speed up the payoff process.
  • Balance transfer cards: Balance transfer cards with 0% intro APR promotions allow you to move your debt to a new card without interest charges for the first 12 to 18 months. This interest-free window allows more of your payment to go to the principal.

The bottom line

Wiping out credit card debt entirely without any consequences or obligation to eventually pay is essentially impossible outside of bankruptcy. While that can certainly provide a fresh start, it comes with immense costs and negative impacts that can take years to recover from.

For most people, finding ways to responsibly pay off their credit card debt over time through a combination of budgeting, negotiating with creditors, debt consolidation and measured use of balance transfers is a better choice. It preserves your credit rating and avoids the financial implications of options like bankruptcy or debt settlement. And, with some diligence and perseverance, that nagging credit card debt can be overcome through commitment rather than avoidance.

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