Many creditors will not forgive your debt, or at least, not until the situation drags on and becomes an extreme situation. In fact, credit card debt forgiveness can be an extremely rare — if not impossible — condition. That said, creditors may be willing to work with you on a plan to pay down the debt over time or even offer to settle the balance.

  1. How Creditors Can Dispose of Your Debt
  2. How Debt Settlement Can Work
  3. Other Types of Debt Cancellation

1. How Creditors Can Dispose of Your Debt

When you have repeatedly failed to make payments on a debt, your creditor may eventually decide that they no longer want to try to collect it themselves. The creditor may charge off the debt, but that decision does not affect your obligation to repay the amount you borrowed — you’re still on the hook for your balance even if your credit card goes delinquent, for example. Some creditors, like Discover, offer hardship programs that can help you meet your financial obligations.

Your creditor may choose to work with a collections agency to try and collect the debt. In other cases, your creditor or the collection agency may go so far as to file a lawsuit against you in an effort to collect the debt. If the creditor wins its lawsuit against you, you will have a judgment against you and may even have your wages garnished in some states. Before any of this happens, you can seek the assistance of a non-profit credit counselor.

2. How Debt Settlement Can Work

In some cases, a creditor may choose to receive just a portion of your debt at once, rather than continue to make an effort to collect all of it or sell it. This kind of agreement is known as a settlement. And while a creditor may be willing to stop collections on a portion of your debt as part of a settlement, in some circumstances, it may have to report that settled debt to the IRS as cancelled debt.

The Federal Trade Commission offers consumer information about the risks and consequences of paying a for-profit debt settlement company, as well as how to avoid debt settlement scams.

3. Other Types of Debt Cancellation

There are other, rare instances where debt can be cancelled by a creditor. For example, when an individual declares bankruptcy, the court may discharge certain types of debts while restructuring others and preserving assets. Debtors should consult a bankruptcy attorney if they feel they need to investigate this option.

There is no simple, easy way to get a creditor to cancel a debt, but there are options available when you can’t repay a credit card balance or loan. By talking to your creditor, you can often find the best solution for your needs. By reaching out to them first, when you start to feel financially pinched, you may be able to work out a payment plan that will help you pay down your debt.

Published April 13, 2017

Updated January 11,2021

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