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What Is Credit Card Debt Forgiveness? contents
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What Is Credit Card Debt Forgiveness?

6 min read
Last Updated: September 24, 2024
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Key Takeaways

  1. Debt forgiveness is when a company cancels some of or all a borrower’s outstanding balance and the borrower no longer owes that debt amount.

  2. Credit card debt forgiveness is uncommon, but other solutions exist for managing debt.

  3. Debt relief and debt consolidation loans are other options to reduce your debts.

Financial hardship can affect anyone, and it can be stressful when credit card debts begin to pile up. But there may be options to help you manage debt. Credit card issuers sometimes work with borrowers to find solutions for unpaid debt. And, though rare, you could have your credit card debt forgiven.

Are you wondering how to get credit card debt forgiven? Educating yourself is the first step in debt forgiveness or other debt relief.

Do credit card companies forgive debt?

Debt forgiveness is when a company cancels some of or all a borrower’s outstanding balance and the borrower no longer owes that debt amount. Examples of debts that a lender could forgive include credit cards, student loan debt, mortgage (through foreclosure), or even a personal loan.

What happens if credit card debt isn’t forgiven?

More common than debt forgiveness is that the lender tries to collect the debt through their debt collection department or a separate debt collector (also known as a collections agency.)

If the creditor or collections agency can't collect the outstanding debt, they may file a lawsuit. If successful, a judgment could result in the borrower having their wages garnished in some states. Before this happens, you may try contacting the credit card company to discuss the situation, or seeking assistance from a nonprofit credit counseling organization.

Some credit card companies, like Discover, offer hardship programs that may help you meet your financial obligations.

Did you know?

Depending on your credit score, you could consider a balance transfer card, which could help consolidate your monthly credit payments and reduce your interest charges with a low intro APR.

Learn More

Debt forgiveness vs. debt relief

Since debt forgiveness is uncommon, debt relief or debt consolidation may be useful alternatives.

Debt relief or debt consolidation programs don’t forgive your debts, but rather they allow better conditions to repay what you owe. You may be able to:

 

  • Restructure your debt
  • Get a lower interest rate
  • Make more manageable monthly payments

Some people choose to work with debt settlement companies to help restructure debt. Be cautious when working with a debt relief company or debt settlement company. There may be risks associated with debt settlement companies so it’s important to research your options first. 

For example, avoid debt settlement offers that “guarantee” they'll be able to settle your debt, as it could be a scam. They may also advise you to stop paying your credit card bill — even the minimum amount due — which could lead to late fees, accumulated interest charges, and a negative impact on your credit score. They might also charge fees for their services, putting you deeper into debt.

Because of the dangers associated with debt settlement companies, a nonprofit credit counselor may be a better option.

Credit counseling

As suggested above, a practical option for debt relief may be to work with a nonprofit credit counseling company.

This type of organization offers credit counseling services to help empower you during a challenging financial situation.

Credit counseling is helpful because it addresses both existing debt and money management. With a credit counseling organization, you could create a debt management plan and get support in restructuring your budget. They may also advise you about debt solution tools. Solutions like a debt consolidation loan could offer a lower interest rate than your current rate and typically merges your bills into one monthly payment. This kind of support could leave you more hopeful and less stressed.

Types of credit card debt forgiveness

When looking at types of credit card debt forgiveness, some options are debt settlement and bankruptcy.

Debt settlement

Debt settlement is when a lender agrees to let a borrower pay less than the amount owed. In these debt relief options, you may work directly with a card issuer to create a debt management plan instead of paying a for-profit debt settlement company to negotiate the settlement.

It’s important to note that while a creditor may be willing to stop collections on a portion of your debt as part of a debt management program, the card issuer may have to report the settled debt to the IRS as canceled debt. In those cases, canceled debt may be taxable, and you would have to report it on your tax return, according to the IRS.

Debt forgiveness through bankruptcy

Another type of credit card debt relief can occur through bankruptcy. When you declare bankruptcy, it can stay on your credit report for up to 10 years, which can negatively impact your credit score and may affect your ability to get new credit or open credit cards.

According to U.S. Courts, when you declare bankruptcy, a court may discharge certain types of debts while restructuring others and preserving assets. Discharging a debt in bankruptcy releases you from personal liability. Individuals can represent themselves in bankruptcy court or consult a bankruptcy attorney if they feel they need to pursue this option.

In a chapter 7 bankruptcy, the individual may need to sell some of their assets to pay a portion of the outstanding debt. In a chapter 13 bankruptcy, the court restructures the outstanding debts so the individual can pay all or some of the agreed-upon balance over three to five years. Under chapter 13, the debtor must complete the payment plan to receive a discharge of the remaining debts.

Secured debt (like a mortgage) and unsecured debt (like credit card debt) are managed differently during a bankruptcy. And there are various types of bankruptcies, so be sure to research which option may be best for your situation.

Choose what’s best for you

If your credit card bills are snowballing, researching debt forgiveness, debt relief, and debt settlement options can be a good start. Credit card debt forgiveness is rare, but your credit card issuer may be willing to negotiate with you. You can also consider debt relief options like finding a nonprofit credit counseling organization to help you resolve debts in a manageable way with less stress.

When you’ve resolved your debt and want to start rebuilding your credit a secured credit card may be a viable choice.

A secured card is a real credit card that requires a cash deposit at account opening which becomes the credit limit on the account. With responsible use, you could rebuild your credit history with the Discover It® Secured Credit Card.1

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Keep in mind that the qualifications and requirements for secured credit cards may vary from card issuer to card issuer. Review the terms and conditions for a secured card, and consider a card that offers pre-approval, especially if you’ve ever filed for bankruptcy.

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  1. Build credit with responsible use (Secured): Discover reports your credit history to the three major credit bureaus so it can help build/rebuild your credit if used responsibly. Late payments, delinquencies or other derogatory activity with your credit card accounts and loans may adversely impact your ability to build/rebuild credit.

  • Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.

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