How to Get Out of Credit Card Debt Without Paying: 5 Strategies

Credit card debt can make your life miserable and keep you from meeting financial goals. Is there a way to make a fresh start without paying this debt? 

The answer is yes. It is possible to get out of credit card debt without paying or by paying less than what's owed. That's great news if you're looking for debt relief, but there are some potential downsides you should understand before you decide what path to choose.

Five Ways to Get Out of Credit Card Debt Without Paying the Full Amount

There are right ways and wrong ways to get out of credit card debt without paying. If you simply stop making payments to your creditors, it could open you up to a lawsuit if.  

Your creditors could sue you and attempt to garnish your wages or seize your bank account if they win a judgment against you. If you'd like to avoid a credit card debt lawsuit, there are five other possibilities for eliminating what you owe without paying in full. 

Debt Forgiveness Programs

Debt forgiveness programs can help if you're facing severe hardships and can't pay your credit card debt in full.

These are programs through which creditors agree to cancel part or all of the amount you owe. Some credit card companies might agree to do this for customers who are having severe financial problems. Examples might include things like unemployment or medical emergencies.

Not all credit card companies offer these programs. Those that do often limit them to people who can show significant financial distress. You’ll probably have to provide documentation of your financial situation. This may involve a lengthy approval process.

Once approved, your creditor may forgive a part of your debt. That could reduce your balance to an amount you can manage. In some extreme cases, the creditor might even wipe out the full amount of the debt.

Pros:

• Debt forgiveness could significantly reduce or eliminate your credit card debt.

• Debt forgiveness could provide relief during times of financial crisis. That would allow you to focus on other essential expenses..

Cons:

• Not everyone qualifies for debt forgiveness.

• Forgiven debt may be considered taxable income by the IRS. That could lead to a tax bill.

• Debt forgiveness is likely to have a negative impact on your credit. Most credit score damage comes from missing payments. Then, settled debts are reported as “settled,” which is better than a collection account but not as favorable as "paid in full."

Financial hardship programs

Financial hardship programs don’t wipe out any of your debt. Instead, they may provide temporary relief to people struggling with credit card payments. These programs are more widely available than debt forgiveness programs.

In a financial hardship program, your credit card issuer may:

• agree to lower your interest rate

• reduce your minimum monthly payment

• waive certain fees for a specific period. 

This relief is temporary, typically lasting 6 to 12 months. Allowing you to pay a little less over that period may allow you to get better control of your finances.

To apply, contact your credit card issuer and provide details about your financial situation. Approval is not guaranteed. It's often based on your ability to show real financial hardship.

Pros:

• Hardship programs can make your debt more manageable. They do this by lowering payments or interest rates temporarily.

• They can help you avoid falling behind on your payments and incurring late fees or penalties.

Cons:

• Your original payment terms will likely be restored once the hardship period ends. This could cause financial strain if your situation hasn't improved.

• Using a hardship program might be reported to credit bureaus. That could affect your credit score.

• These programs are typically temporary. They may not be a long-term solution for ongoing financial difficulties.

Bankruptcy - Chapter 13

Bankruptcy means asking a federal court to grant you relief from your debts because you're unable to pay. If you're considering bankruptcy to get out of credit card debt without paying, you typically have two options: Chapter 7 or Chapter 13. 

Chapter 13 bankruptcy doesn't zero out credit card debts or other debts completely. When you file Chapter 13, you agree to complete a repayment plan that's approved by the bankruptcy court. Depending on your income, it can take three to five years to complete the plan.

The total amount you repay depends on how much you owe and your monthly household income. A bankruptcy trustee determines how much you're required to pay. Any remaining balances owed at the end of your payment plan are discharged (forgiven) by the court. 

Here are the pros and cons of filing Chapter 13 to get rid of credit card debt.

Pros:

• Chapter 13 bankruptcy gives you time to pay back what you owe, without having to worry about being sued.

• You may be able to get some of your credit card debt balances wiped out once you complete your repayment plan. 

• You're not required to hand over any of your assets or property to the court to satisfy your creditors. 

Cons:

• You'll need to pass a means test to prove you have sufficient income to make payments to the plan. 

• You'd still be responsible for paying any debts in full that weren't included in your Chapter 13 filing. 

• A Chapter 13 filing can stay on your credit reports for up to seven years and hurt your credit scores. 

Bankruptcy - Chapter 7

Unlike Chapter 13, Chapter 7 bankruptcy can wipe the slate clean on credit cards and other debts. In a Chapter 7 bankruptcy, you agree to hand some of your assets (if you have any) over to the court. The court liquidates those assets and uses the money to pay off your creditors. 

You can walk away from a Chapter 7 filing without paying anything directly to your credit card debts. However, you might be required to give up assets unless you qualify for exemptions. For example, the federal government may allow you to keep:

• Real estate (the home you live in)

• Car 

• Jewelry 

• Household goods, including furniture and appliances

• Tools and equipment that are necessary to do your job

• Life insurance policies

• Home health aids

All of these exemptions have dollar limits. For instance, the government allows $4,450 for your car. If you drive a $60,000 Tesla, it might not be protected.

Depending on where you live, you might be able to use state exemption rules instead. But giving up some of your property might be a worthwhile tradeoff if you're ready to escape credit card debt and start over financially. 

Here are the pros and cons of filing Chapter 7 to get rid of credit card debt.

Pros:

• Chapter 7 can allow you to start off with a clean slate and zero out all of your credit card balances without paying anything. 

• You can become credit card debt-free through Chapter 7 in a matter of months, versus taking several years to complete Chapter 13. 

• Filing Chapter 7 bankruptcy can immediately halt creditor collection actions, including civil lawsuits. 

Cons:

• You may not qualify for Chapter 7 if your income is over certain limits  

• You may have to give up certain assets in order to qualify for a discharge of credit card debts in Chapter 7. 

• A Chapter 7 filing can stay on your credit reports for up to 10 years and hurt your credit scores.

Debt negotiation

Debt negotiation, also referred to as debt settlement, means asking your credit card companies to accept less than the full amount owed on your balances. Negotiating debt can help you pay off credit cards for less money. 

For example, say you owe $5,000 to one of your credit cards. You could try to negotiate with the credit card company to accept $3,800 instead. Once you make the payment, the remaining $1,200 in debt is canceled and you owe nothing else. To convince a credit card company to do this, you’ll have to convince them that there is no way you’d be able to pay the full amount you owe. 

You might consider debt negotiation if you've fallen behind on credit card bills but you'd rather avoid filing bankruptcy. Here are the pros and cons of using debt negotiation to get out of credit card debt. 

Pros:

• Debt negotiation allows you to get out of credit card debt while paying less than what you owe.

• You can hire a debt negotiation company to haggle with credit card companies and get you the best deal possible. 

• Negotiating debt could help you to become free of credit card debt faster, without having to resort to bankruptcy. 

Cons:

• Any forgiven or canceled debt might be considered taxable income by the IRS, unless you can prove that you're insolvent. 

• Debt negotiation companies can charge fees for their services, so you'll have to consider whether the cost is worth it. 

• Creditors are usually only willing to negotiate debt once you're past due, which can hurt your credit score

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Your credit score and not paying credit card debt

Payment history accounts for 35% of your FICO credit score. Lenders use your FICO scores to gauge how likely you are to pay back what you borrow. The lower your score, the more difficult it is to get approved for loans or qualify for the lowest rates. 

If you stop paying credit card bills for any reason, whether it's due to a financial hardship or because you've started working with a debt negotiation company, you'll likely see a credit score drop. How steep the drop is depends on where your score was before you started missing payments. 

After multiple late payments, your creditor might charge off your account. At that point, it's considered a bad debt and may be sold to a debt collector. As a general rule of thumb, the more delinquent the debt is the worse the impact to your score. 

Two ways to reduce your monthly payment

Since having a credit card company forgive your debt can have a negative impact on credit,and alternative to consider is getting debt relief that lowers your monthly payment. This may take you longer to repay your debt, but it could reduce the strain on your monthly budget. 

There are two ways to lower monthly credit card payments that don't involve bankruptcy or debt negotiation. 

Debt management plan

A debt management plan (DMP) allows you to streamline credit card debt payments. You work with a credit counselor who helps you to create a plan that fits your budget. Here's how it works:

• You enroll your credit card debts in the plan.

• Once enrolled, you make a single monthly payment to the plan. 

• Your credit counselor distributes the payment among your creditors. 

The process continues until your enrolled debts are paid off. Your monthly payment may also include a small fee that goes directly to the credit counseling agency. 

DMPs don't reduce the amount of credit card debt you owe. Instead, you're restructuring the way you repay that debt so that it's less of a strain financially. However, your credit counselor might be able to negotiate certain benefits on your behalf, such as fee waivers or interest rate reductions. 

Creditors are not required to agree to participate in a DMP (they don’t have a choice when it’s a bankruptcy). They often will, though, because it means they can expect to be repaid.

Debt consolidation

Debt consolidation means combining multiple debts into one, typically through a debt consolidation loan or a balance transfer credit card. Essentially, you're taking out a new loan or line of credit to pay off what you owe to your credit cards. 

Why would you do that? Debt consolidation won't reduce your debt balances. However, you might be able to get a lower interest rate on a debt consolidation loan or with a 0% APR balance transfer credit card. 

Debt consolidation can also simplify paying bills each month, since you'd only have one loan or credit card payment to make. The key to benefitting from a debt consolidation loan is to be committed to not running up new balances on the cards you've paid off. You don’t want to end up with the loan and new credit card debt.

Four steps to take to pay less on your credit card debt

If you're looking for some ways to get out of credit card debt without paying in full, you've got some options. These tips can help you to pay less of your credit card debt and get control of your finances. 

1. Gather your information

Know your starting point. Take an afternoon to round up information about your debts, including:

• What you owe to each credit card

• The interest rate for each card

• Minimum monthly payment due for each balance

• How much you're actually paying to each card

• Your credit scores

You may also want to have a copy of your monthly budget handy, as you'll need this for the next step.

2. Talk to a debt counselor

A certified credit or debt counselor can review your finances and help you come up with a plan for managing credit card debts. There are a few options for finding a credit counselor to work with:

• National Foundation for Consumer Credit Counseling (NFCC)

• Financial Counseling Association of America (FCAA)

• United States Trustee Program (if you think you might need pre-bankruptcy credit counseling)

You can also speak to a Freedom Debt Relief debt consultant if you think you might be a good candidate for debt negotiation and you want to consider all your options.

3. Choose a debt solution

Depending on your budget and debt, your credit counselor or debt consultant might recommend any of the following:

• Debt management plan

• Debt consolidation

• Debt negotiation

• Bankruptcy

Once you’ve reviewed these options, you should be ready to choose the right solution. If you still have questions about any of the options listed above, you can ask your credit counselor for more details.

Also, remember to look at the pros and cons of each one. While some of these solutions could help you get out of credit card debt without paying anything or paying less, they can ding your credit score in a major way. 

Ultimately, the best debt solution for you might be the one that offers the most acceptable combination of pros and cons. 

4. Stick to your plan

Once you've chosen a debt solution, the final step is to commit to it. 

For example, if you're enrolling in a debt management plan, that means making your scheduled payment on time each month. Or if you're opting for a debt consolidation loan you might want to consider closing your credit card accounts while you pay off the loan. At the very least, you’ll need to learn how to avoid running up new debt and making your problem worse. 

Having an accountability partner can help if you're struggling to stick with your plan. You can schedule rule check-ins with a friend, family member or your credit counselor to discuss any challenges you might run into with paying off your debt.