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What is credit card debt forgiveness?

If you're overwhelmed by credit card debt, some types of debt forgiveness may be in reach. Getty Images

Right now, the majority of Americans have credit cards in their wallets — and more than one in three say they owe more to credit card companies than they have in emergency savings. But while card debt is common, the high interest rates that credit card accounts come with, combined with minimum payments that primarily go toward interest charges, can make credit card debt difficult to pay off

Is there a way to get out of credit card debt without paying the full amount of your balance, though? And, if so, what does credit card debt forgiveness involve?

Find out whether you can get your credit card debt forgiven today

What is credit card debt forgiveness?

Credit card debt forgiveness can be part of a debt relief service known as debt settlement. Here's how credit card debt forgiveness works as part of a debt settlement program:

  1. Information gathering: Debt settlement services usually start with an expert who gathers information from you. A representative will ask about your income, your debts and your other expenses like utilities, insurance, groceries and gas. 
  2. Payment plan creation: Using the information you provide, the debt settlement company works to create an affordable payment plan to help settle your debts in a reasonable amount of time. 
  3. Settlement savings: After the payment plan is created, you'll typically stop sending payments to the credit card companies and replace them with monthly payments to your debt settlement provider. These companies hold the money you pay to them in a special-purpose savings account until you've saved enough to start settling your debts.  
  4. Negotiations: Once you have enough money saved, the settlement company starts negotiating with your lenders. The goal is to settle your debts for less than you owe. When a negotiation is successful, the credit card company accepts a lesser amount of money than what you owe to settle your debts and forgive the remaining portion of your balance. 

Consider tackling your debts with a debt settlement service now

Who qualifies for credit card debt forgiveness?

Many people who are struggling with their credit card debt will qualify for credit card debt forgiveness. Here are a couple of qualifying factors:

  • The amount you owe: In general, you'll need to owe at least $10,000 to meet the qualifications set by debt settlement companies. However, you may qualify for services from some companies with less debt. For example, you only need $7,500 in credit card debt to qualify for the Freedom Debt Relief debt settlement program.
  • Payment difficulty: Debt settlement companies typically use your financial hardship as a tool for negotiations, so you may have an easier time with qualifying if you're having a difficult time with your payments.    

Debt management is another option to consider

"While a debt settlement may help you pay less than you originally owed and avoid bankruptcy, it can also have a negative impact on your credit score," says Stacey Black, BECU's lead financial educator. "Plus, there may even be tax implications."

As such, it's important to consider all of your options. 

"You may consider looking into a debt management program," says Black. These programs provide "personalized financial counseling and debt management services."

These services, also commonly referred to as credit card debt consolidation programs, start with an analysis of your overall financial position. Once this is complete, these companies typically work with your creditors to reduce your interest rates and improve your payment terms. Then, they'll create a payment plan that's designed to get you out of debt faster. 

You make your payments to the debt management company,  which pays your creditors on your behalf. Although these programs don't typically lead to your credit card debt being forgiven, they do often result in affordable payments and significant savings on interest charges. 

Moreover, debt consolidation programs tend to have a lesser impact on consumer credit scores than debt settlement. 

The bottom line

Debt settlement companies may be able to help you get a portion of your credit card debt forgiven. And, it can be a good option for those facing financial hardships as a result of high credit card balances. On the other hand, it's also important to consider other debt relief options — like debt consolidation — as an alternative. 

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