Is credit card debt relief real?

Some forms of credit card debt relief are real, including hardship programs, debt settlement agreements, and transactions like balance transfers and debt consolidation. These things can reduce what you owe or make the payments more manageable, but they won’t wipe out your debt completely. There is no government-sponsored credit card debt relief program either, unless you count bankruptcy.

Common Credit Card Debt Relief Programs

Debt management

Also known as a debt management plan, or DMP, this service is commonly offered by nonprofit credit counseling agencies, though you can pursue debt management on your own as well. The objective of the DMP is to come up with a payment plan to pay off your full debt over a predetermined timeframe, usually 3 to 5 years, though the exact length of the program will depend on the amount of debt and the payment amount agreed to in the plan. Certain fees and interest charges may be waived as part of debt management.  

Debt settlement

Debt settlement involves negotiating with a credit card issuer to satisfy your debt obligation by only paying a portion of what you owe, usually in one lump-sum payment. You can negotiate with your credit card issuer on your own or find a reputable credit counseling agency to work with the issuer on your behalf. Note that your account usually needs to be in default before you’ll even have a chance at a settlement.

If you enter into a debt settlement agreement, it’s important to honor the terms until you’ve completed the program. If you violate any of the terms, such as missing a payment, the issuer may terminate the agreement. This could increase the chances of the issuer suing you to get its money.

Debt Forbearance

Credit card forbearance is a temporary debt relief program credit card issuers offer cardholders with a proven financial hardship. This could include short-term financial difficulties such as job loss, unexpected medical bills, or other circumstances that significantly affect your ability to make credit card payments. It’s important to understand that forbearance is not debt forgiveness, but rather a temporary delay in your monthly payments or other accommodations.

You will need to contact your issuer to request enrollment in a forbearance plan and provide documentation of any financial hardship. If you’re approved, the issuer will outline the terms of the program, which may include a reduced monthly payment, fee waivers or even reduced interest rates. The issuer may also “freeze” your account while you’re enrolled in their forbearance plan.

Most credit card issuers have a separate hardship department, but they don’t advertise this service, so it may take some effort on your part to find them. In most cases, you can contact the issuer’s customer service department, and they will route your inquiry to their hardship line.

Debt Consolidation

Financial institutions may offer personal loans or balance transfer cards that will allow you to combine your debts into a single monthly payment, presumably at a lower interest rate. While debt consolidation won’t reduce the amount of debt you owe, it will simplify your payments and help you get out of debt sooner. Note that you may need at least good credit to qualify or secure the most favorable terms.

Bankruptcy

Bankruptcy can have a devastating effect on your credit, as it will stay on your credit report for 7 to 10 years, so make sure you’ve considered and ruled out all other options before taking this route. If you do opt for bankruptcy, there are two types that commonly apply to individuals: Chapter 7 and Chapter 13. Your financial situation will determine which type of bankruptcy you should file. It’s important to note that bankruptcy may not discharge all your debt, and the bankruptcy courts will ultimately determine how much of your debt gets erased.

For more information, check out our guide to the most common debt solutions.