Cancellation of credit card debt is it possible

By Sarah R
Modified on April 24, 2023
cancellation of credit card debt

Tired of dealing with unreasonable credit card issuers and wondering if cancelation of credit card debt is possible? Thankfully, there are several ways you can achieve credit card forgiveness or debt eradication. 

Keep reading to learn about the best ways you can knock out your credit card debt! 

How Does Credit Card Debt Forgiveness Work?  

What are your debt relief options when it comes to credit card issuers? While it is uncommon that a credit card company will completely eliminate a borrower’s credit card debt, they will always normally work with borrowers to come up with some kind of debt forgiveness or settlement plan. 

Keep in mind that credit card debt forgiveness may be considered taxable income. That means you may be required to pay taxes on your forgiven debt amount. So, before you decide to go for credit card debt forgiveness, make sure you can afford the potential tax consequences. 

How To Negotiate Debt With a Credit Card Issuer

One way you can work towards having your credit card debt forgiven is to negotiate with your credit card issuer. Customers have two main options when negotiating credit card debt; debt negotiation or debt settlement. Debt negotiation involves:

  • Reaching out to your lender.
  • Identifying any missed payments.
  • Talking about a repayment plan. 

To negotiate Credit card debt with a lender, call their customer service line and ask to speak with an agent. Once connected, the agent can bring up your credit card profile, where they will be able to see your past statements and balances. Talk to the agent about credit card debt forgiveness and see what they can do for you. They may be able to lower your rates or get rid of certain fees that have been dragging you down. 

If you don’t choose to work with your credit card issuer and refuse to pay your credit card debt, the lender may be forced to send your account to a collections agency, where you will then go through the debt settlement process. 

Debt settlement happens when lenders send delinquent accounts to a debt settlement company, who then works with borrowers in an attempt to rectify the outstanding balance. Those who choose to negotiate debt settlement on their own are responsible for working with the collections agency to agree on a debt settlement agreement. Or, they can contact a bankruptcy lawyer if there is absolutely no way at all to pay off the debts. 

What Is Bankruptcy? 

Bankruptcy is a last resort financial solution for people with no way of paying their debts and financial obligations. While bankruptcy may help get rid of credit card debt, it will also leave a negative mark on your credit report that may impact your score for ten years or more! So, decide carefully if you are thinking about declaring bankruptcy. 

What Happens if You Don’t Pay Credit Card Debt?

Neglecting to pay back your credit card debt can, unfortunately, cause significant credit damage. Missing payments or even making late payments on credit card debt substantially affects your payment history, which credit bureaus rely on quite heavily when determining your credit score. Payment history makes up 35% of your overall credit score, making it the most influential factor on your credit report. So, by missing payments on your credit card, you are not only accumulating more debt, but you are also hurting your credit score. 

Furthermore, if you continue not making payments on your credit card balance, your lender may be forced to send your account to a debt collector. Debt collectors, also called a collection agency, are a type of financial institution that purchases delinquent financial accounts from lenders. 

Can a Credit Card Company Take You to Jail?

While a credit card company may send you a court summons, they may not threaten you with jail time. It’s illegal for lenders to send delinquent borrowers to jail solely for not paying their debts. However, if you have a delinquent credit card account and make no effort to make payments, the lender may take you to small claims court. 

When going to court for unpaid debt, you may have to deal with court fees as well as make arrangements for paying back the original lender. To avoid a great deal of hassle and inconvenience, work with your lender and make a repayment plan for taking care of your remaining balance before the situation goes to court. 

How Cancelling Credit Card Debt Can Affect Credit Scores

You may be contemplating cancelling your credit card account altogether as a form of debt forgiveness, but this may not be the best financial solution. When compiling your credit report, credit bureaus look at how much money borrowers have at their disposal, which includes credit card limits. If you cancel a credit card, you may reduce the amount of money at your disposal by thousands of dollars, which many lenders may see as a red flag. To keep your credit utilization intact, only cancel a credit card account when it is absolutely necessary. 

When Should You Cancel a Credit Card Account?

While you want to avoid canceling a credit card account if you can, sometimes it is the wisest financial solution. For example, if you find your impulsive credit card purchases are starting to affect your budget significantly, it may be time to get rid of your card. However, before you cancel your card, try hiding it in a secure place. You may find that having your card out of easy reach is enough to keep you from spending impulsively! 

Another reason to cancel a credit card is if you simply cannot afford it. Many credit cards come with annual fees and other expenses borrowers are responsible for. If you cannot afford these fees, having a credit card account may not be a good idea for you. But, before you cancel your account, for this reason, contact the credit card company. They may be willing to lower or completely eliminate your fees if it means keeping you on as a customer. 

Tips for Getting Out of Credit Card Debt 

The best way to achieve credit card debt forgiveness is to pay back the credit card issuer. While you can try methods like getting a balance transfer credit card, this may not be the most affordable option in the long run. Instead, try the tips below for successfully paying off credit card debt. 

Make Consistent Monthly Payments 

The most important part of paying back debts is to stay on top of your monthly payment. Just one missed or late payment can leave a negative mark on your credit report for years, so it is best practice to always make your credit card payments on or before their due date. 

If you feel like you are having trouble paying back your credit card balance, talk to your issuer immediately. Credit card companies are often willing to work with borrowers if it means avoiding a missed payment or delinquent account. 

Get Help When You Need It: Try a Credit Counseling Agency 

If you are having trouble handling your finances, on the whole, it may be a good idea to seek out some professional help. By working with a credit counseling agency, you may get paired with a helpful credit counselor who can give you personalized advice about paying off your debts and improving your credit score. 

One suggestion a credit counselor may have is getting a debt consolidation loan. With debt consolidation, a personal loan may be able to bring down your monthly payments and reduce the amount of interest charges you accrue. Consolidating debt is a great way to save money on credit card debt and on other loans draining you financially, such as a pay day loan

Pay More When You Can 

Along with making consistent payments on your credit card debt, it may also be a good idea to make increased or additional payments when possible. By making more than just one lump sum payment a month, you may reduce the amount of time it takes to eradicate your credit card debt by months or even years! 

Try a No-spend or Money Saving Challenge 

Work on saving money by doing a no-spend challenge. Then, use any money you saved up for your credit card debt! To do a no-spend challenge, first, make a list of all of your necessary expenses. These may include: 

  • Rent/mortgage. 
  • Groceries. 
  • Gas/Commuting costs. 
  • Recurring bills, subscriptions, or membership payments. 

Once you have all your necessary expenses mapped out, work towards saving any money you earn that does not have to go towards those required expenses. Then, use at least a portion of those savings to pay off your credit card debt. You may find that doing a no-spend challenge works as a great debt management plan that can help you spend less and save more, as well as help knock out credit card debt! 

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