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The Basics of Credit Card Debt Forgiveness
June 17, 2020

The Basics of Credit Card Debt Forgiveness

Credit card debt forgiveness is what happens when your credit card company “forgives” your debt to them. While it sounds ideal,  the process can be complicated. So, when it comes to credit cards, precisely how does debt forgiveness work, and what are some of the best ways how to get credit card debt forgiven?

For a lender or creditor, like your credit card company, credit card, forgiveness isn’t going to mean they simply write off your debt; full debt forgiveness is pretty much non-existent.

The Basics of Credit Card Debt Forgiveness

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How Can I Get Credit Card Debt Forgiveness?

The first thing you’ll want to do is contact your creditor (i.e., your credit card company), so you can begin negotiations. You can contact the relevant party yourself, or you can have an authorized representative contact your creditor and conduct negotiations for you.

Ultimately, it’s up to your creditor whether you qualify for debt forgiveness, and they may not provide you the option. But, with certain credit card forgiveness programs available, you may be more than likely to have your debt forgiven.

Is There Credit Card Forgiveness for Disabled Persons

A disability does not, on its own, entitle you to credit card debt forgiveness, but can be leveraged in negotiations with your creditor to increase your chances of securing credit debt forgiveness. Additionally, some other options for you to consider would be asking your credit card company about whether they provide for hardship plans, or whether they have a cancellation policy for death or disability.

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How Will Credit Card Debt Forgiveness Affect Me?

You’ll usually need to pay back a portion of your debt before qualifying for forgiveness for the outstanding debt. After which you’ll be affected by a reduced credit score, and a remark will be added that will make it difficult to get more credit from other lenders for a period of time.

This remark stays for 7 years, after which you may then need to have it removed. If you do manage to find another lender during this period, any debt you accrue will more than likely come with a higher interest rate.

If you are able to successfully negotiate for debt forgiveness, you also run the risk of having your account closed.

Depending on your creditor, their credit card debt forgiveness program will vary. Some credit card debt forgiveness programs provide an option to re-age your account —to extend the time that your creditor can appeal to a court to collect your debt— in addition to requiring a minimum payment on your debt to qualify for the forgiveness for the remainder.

When is Debt Forgiveness Not the Right Option?

If your credit score is good, and your priority is maintaining it, credit card debt forgiveness is not the right strategy. Instead, you’ll want to contact your credit card company to assure them that you will pay them what you owe. You’d be surprised; many creditors will be willing to work with you when you’ve got a good track record and a clean bill of financial health.

Consistent previous payments and a good credit score demonstrate to creditors that whatever situation you may find yourself in is likely only a minor setback, and they could potentially even offer adjustments on your payments or waive late fees for you to keep your business.

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When Should I Apply for Credit Card Debt Forgiveness?

When you begin to doubt your capability to repay your debts or if you’re already behind on a month or two of payments, you might jump immediately to the idea of credit debt forgiveness. You should know that at this point, seeking a settlement may be wholly unnecessary.

Unless you’re behind on your payments by more than three months, you’re better off holding off on seeking a settlement. At this point, creditors know that you’re still likely to be able to fully repay your debt; since they’d prefer to have all of their money back, paradoxically, when your debt is not yet so large, your settlement is less likely to be approved.

Instead, to improve your chances of getting your settlement approved, wait until your creditor is deciding on charging off their accounts. When creditors charge off accounts, they are selling them to another debt collector for less than what you owe them —at a loss— and something creditors want to avoid. During this time, they’re more likely to settle with you.

If your account has recently been charged off to a debt collector, this is another opportunity to reach a settlement. After purchasing your debt at a discounted price, debt collectors are open to settling as they’re still turning a profit.

If you’re unsure whether now is the right time to apply for credit card debt forgiveness, DebtQuest can provide the counseling you need to make your choice. Get in touch with us to learn more about how we can help you get your financial health back in check.

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