What Is Credit Card Debt Forgiveness?
8 Min Read | Published: May 23, 2025
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Discover how credit card debt forgiveness works, its risks and potential impact on your credit score, plus alternatives for managing credit card debt.
At-A-Glance
- Complete credit card debt forgiveness is rare, but borrowers may be able to use other debt-relief options like debt settlement instead.
- Debt relief can have long-term financial consequences, including potential negative credit impacts and tax liabilities on forgiven debt.
- There are several alternatives to debt forgiveness, such as debt settlement, consolidation loans, and balance transfer credit cards, which may help manage debt more effectively.
You might be familiar with the idea of debt forgiveness as it pertains to student loans. For example, if you work in a particular job, like teaching or nursing, for an eligible employer and make a specific number of qualifying payments, certain types of student loans may be eligible for student loan debt forgiveness. If the debt is forgiven, you would no longer need to make payments.1 But is there a similar option for other types of debt, like credit cards?
If you’re struggling to make your minimum credit card payment each month, it can be appealing to look for quick-fix solutions. But the seemingly quick fix of debt forgiveness often comes with long-term consequences. Before you talk to a credit card issuer about debt forgiveness, it’s important to fully understand what it is, how it works, and which alternatives are available.
How Does Credit Card Debt Forgiveness Work?
It’s important to note that complete credit card debt forgiveness is rare. If a lender is willing to eliminate some or all credit card debt, there may be terms and conditions that can have consequences, like a negative impact on your credit score.
To be considered for debt forgiveness, you may need to first show that:
- You have a lot of debt and insufficient resources to pay it back.
- You’ve experienced a major hardship like a medical event or job loss that makes repaying the debt impossible.
- You’re behind on payments, and there’s no chance of catching up based on your current financial situation.
Even after proving this to a lender, they may encourage you to pursue debt relief options to decrease what you owe as opposed to forgiving the full balance. Each credit card issuer is different, so it’s important to contact your credit card company to discuss eligibility criteria and how to submit a request for debt forgiveness.
More commonly, those facing credit card debt pursue other debt-relief options like debt settlement, a process by which you attempt to settle your debt with creditors for an amount that’s less than what you currently owe.
Debt Forgiveness vs. Debt Relief
While the terms are sometimes used interchangeably, there are key differences between debt forgiveness and debt relief. Complete credit card debt forgiveness is rare, but debt relief programs can help you negotiate with creditors.
| Debt Forgiveness | Debt Relief |
|---|---|
| Cancels some or all of your debt | Helps make debt easier to manage, but you still may need to pay part or all of the debt off |
| Can damage your credit score | May help improve your credit score over time if you can develop good debt management habits |
| May only be available to people in extreme financial hardship | May be more widely available for people who need support managing debt |
Did you know?
Instead of forgiving debt, some card issuers may “charge off” your debt and sell it to a collection agency, often at pennies on the dollar. Even if you paid off a debt, the paid collections account may continue to show up on your credit report for up to seven years.2
Alternatives to Debt Forgiveness
Before you pursue debt forgiveness, it’s also worth exploring alternatives to get out of debt, including the following:
- Debt Relief Programs
Debt relief programs encompass a broad range of approaches that help people manage debt. Depending on the type of program and the company that offers it, debt relief might mean renegotiating or changing the terms of your debt or settling for a lower amount. - Debt Settlement
Debt settlement is a specific type of debt relief where you, or the company working on your behalf, negotiate with the lender to pay a lower amount than what you currently owe. Per the negotiated agreement, when that amount is paid, the lender agrees to cancel the rest of your debt.
Even though some of the debt is considered settled, it may still need to be reported to the IRS (Internal Revenue Service) as taxable income.3 Be sure to check with a tax professional about the implications of debt settlement on your annual taxes. And keep in mind that if you work with a debt settlement company, they may charge high fees for service. - Debt Management Program
A debt management program (DMP) is managed by a non-profit credit counseling agency that is responsible for paying your lenders according to an agreed-upon payment plan. They may also negotiate on your behalf to try to reduce payments and avoid fees. In a DMP, you pay your credit counselor a designated amount, and they’ll manage payments to each lender, deciding how much to allocate toward each debt. - Bankruptcy
Bankruptcy is a legal process to discharge debt, and depending on the type, bankruptcy can stay on your credit report for seven to 10 years. With bankruptcy, you may be put on a payment plan, your assets may be liquidated to pay off certain debts, or debts may be forgiven. It’s highly recommended to consult with a lawyer before pursuing bankruptcy due to the long-term legal and financial ramifications.4 - Debt Consolidation Loan
A debt consolidation loan is a type of personal loan that someone can use to help them more effectively manage high-interest debt. When you take out a debt consolidation loan, you use it to pay off the balances of your high-interest debt, essentially rolling the balance of all of your debts into a single, easier-to-manage monthly payment. - Balance Transfer Credit Card
A balance transfer credit card can help you shift credit card debt from multiple cards to a single card. Some card issuers offer balance transfer cards with a 0% interest period, sometimes between 12 and 18 months. If you qualify for these offers, and you may need a good credit score to qualify, you can then aggressively pay off the debt during that period.
How Debt Forgiveness Affects Your Credit
Debt forgiveness can have a negative implication on your credit score in several ways:
- You may have missed credit card payments leading up to requesting forgiveness, and missed or late payments can damage your score.
- Some types of forgiven debt, like bankruptcy, can stay on your credit report for a period of years, meaning it could be more difficult to get approved for loans in the future.
The best way to combat negative impacts on your credit score is to adopt responsible credit habits going forward. Use strategies like making payments on time, avoiding applying for more credit than you need, and keeping your credit card balances low to help your credit score recover.
Frequently Asked Questions
There are several approaches to paying off credit card debt, including getting motivated by finding your “why” and setting a goal to get out of debt. From there, you can try strategies like the debt snowball, debt snowflake, or debt avalanche, or look for a balance transfer credit card or debt consolidation loan.
Generally, debt that’s forgiven doesn’t come back later unless that debt was sold to a collection agency.
The Takeaway
While credit card debt forgiveness is uncommon, there are many strategies that can help you get out of credit card debt. Explore available alternatives, including debt management programs, debt relief, and debt consolidation loans, then consult with a financial professional as needed to help you make the right decision for your short-term financial needs and long-term vision.
1 “Student Loan Forgiveness,” Federal Student Aid
2 “Debt Collection FAQs,” Federal Trade Commission
3 “Topic no. 431, Canceled debt – Is it taxable or not?,” Internal Revenue Service
4 “Bankruptcy,” United States Courts
5 “Home Equity Loans and Home Equity Lines of Credit,” Federal Trade Commission
Brooke Joly is a writer on a mission to unravel the mysteries of personal finance and make them accessible to the everyday reader. When she’s not behind the keyboard, you can find her enjoying the outdoors in Charleston, SC.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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