Is it possible to cancel your credit card debt? It’s a question that many people are asking these days. With an economy in freefall and unemployment skyrocketing, more and more consumers are taking on the burden of credit card debt. And with the holidays coming up, you can bet that even more people will be trying to find ways of dealing with their mounting credit card bills.
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The basics of credit card debt cancellation are simple
The basics of credit card debt cancellation are simple. Credit card debt cancellation allows you to pay off some or all of your credit card debt, and you won’t have to deal with the collector calls anymore.
Here’s how it works:
You pay the creditor a lump sum of money that they accept as payment in full (also known as “cancellation”). This can be done through bankruptcy court or through an agreement with the creditor outside of bankruptcy court.
If you have more than one account on your credit report but no pending collections accounts or unpaid judgments against you, this method may work well for getting rid of some or all of your debt.
What is credit card debt eligible for cancellation?
Credit card debt forgiveness is eligible for cancellation if:
- The debt has been outstanding for more than 7 years.
- The total amount of the debt is less than $10,000.
- There are no other factors that would prevent a successful application, such as a tax lien or judgment against you (more on these in the next section).
How does it work?
- You can get help from a nonprofit organization, such as the National Foundation for Credit Counseling (NFCC) or Consumer Credit Counseling Service (CCCS).
- You can seek legal assistance at a legal aid clinic.
- You can apply for a debt management plan through one of the credit counseling organizations listed above.
- If none of these options are possible, you may file for Chapter 7 bankruptcy instead. This will allow you to cancel some or all of your debts if certain conditions are met—meaning that if you qualify, your creditors will no longer be able to collect from you.
According to Lantern by SoFi advisors, “Even though a portion of your debt will be forgiven, there can still be consequences to your credit history, credit score and tax liability. “
What about student loan debt?
If you have student loan debt, don’t expect to be able to cancel it. It’s not like credit card debt, which is a private obligation between you and your creditor. Student loans are different—they’re a federal obligation that the government guarantees, so there’s no way for you or your creditors to reach an out-of-court settlement.
If you’re struggling with high student loan payments, consider refinancing them with a third-party lender who can help refinance at lower interest rates and get you more time to pay off the principal balance of your loans.
The good news is that you can cancel your credit card debt. You just have to make sure it qualifies for cancellation and then follow all the necessary steps at each stage of the process. It’s not a simple or quick process, but it can be done if you’re willing to put in the time.
