Who Qualifies for Credit Card Debt Forgiveness?

Who Qualifies for Credit Card Debt Forgiveness?

No parameters are set for the people’s eligibility criteria to avail of this credit card debt forgiveness. Even if they are available, they're not available publicly or transparently. Most first-time credit card users do not know how credit card interest works.

They will end up paying more than they bargained for, and they are now saddled with debt. So we don't know exactly which category of income group qualifies for this credit card debt forgiveness.

But there are ways one can get their credit card debt cancelled by the banks, but let’s just know what credit card debt forgiveness is and the steps to get debt forgiven. 

What is Credit Card Debt Forgiveness? 

When a credit card holder is saddled with debt on their card due to financial constraints, the bank or institution that offered the credit card will offer help to forgive that debt by means of negotiation, and participating in the debt relief program is called credit card debt forgiveness.

People have been saddled with debt because they do not know how credit card interest works, and the interest on credit cards is charged in two ways: one is for the person who uses the card to get goods and services (purchases), and the other is for cash advances.

In the case of the latter, funds are offered based on the line of credit that is available on the credit card, which will be charged to multiple interests. So naturally, people will be saddled with debt.

Suppose they do not know various interest charges like the prime rate, annual percentage rate, daily rate, and grace period in the case of cash advances. With this basic understanding, we will now learn various ways one can settle credit card debt.

Types of Credit Card Debt Forgiveness Programs

Credit card debt is forgiven in three broad ways through negotiations. They are debt settlement, bankruptcy, and debt consolidation loans, each of which is suitable for the respective individuals' debt levels. 

Debt settlement 

A debt settlement works like a typical assessment plan. In most debt settlement companies, debtors will be assessed based on their financial capability and debt level and drawn up a payment plan.

Then the debtors will start making payments to the debt settlement company's special purpose savings bank account. Once the critical level is reached, the debt settlement company will start negotiating with credit card companies to get the principal loan amount of the of the debt forgotten.

In most cases, the debt will be forgotten. But it will likely affect your credit score and your ability to borrow for some time. But the forgotten debt amount needs to be paid in income tax. 

Debt consolidation loan

This loan is suitable for people who have debts other than a credit card, so they can combine them to take a loan and pay lower interest on the loan. This loan has hidden benefits, like an improved credit score if you had an earlier track record.

There might be short-term debt consolidation loans available, but they will be given based on your financial capability. 

Bankruptcy

If your debt settlement plan does not suit your financial conditions and you do not have enough savings for a payment plan in the debt settlement, You can always go for the bankruptcy plan, which will help you get off your credit card debt. But this will also affect your credit score and loan borrowing capability for some time.

Debtors who want to try this should consider it a last-resort option. 

These three are the most common ways one can write off credit card debt in a reliable manner. 

Does Credit card Debt Forgiveness Affect your Credit Score?

Credit card debt forgiveness will indeed affect your credit score, either positively or negatively, based on your previous financial record and your current one. But in most cases, credit card debt has affected people negatively on their credit score for a 2-3 year time frame.

It has happened because you did not pay the monthly credit card bill, which you are obligated to pay as per the service of your credit card. But they will not affect your lifetime creditscore, but only for the short term, so one doesn't need to worry about them that much. 

What are the Positives and Negatives of Credit Card Debt Forgiveness?

Credit card debt forgiveness has the benefit of affecting your financial standing in the borrowing market as well as your standing in credit acceptance. Let’s now look at its positives and negatives. 

Positives of credit card debt forgiveness

• Credit card debt forgiveness will come as a big saver if you are stuck in financial quicksand.
• This credit card debt forgiveness will help you out of the debt and serve as stress relief.
• Help you save massive amounts, as credit card debts tend to be expensive. 
• Saving the burden of paying the full principal debt amount.

Negatives of credit card debt forgiveness 

• In some rare cases, creditors would not accept the negotiation plan, which would increase the debt level.
• The forgotten debt amount will have to be paid as income tax to the IRS.
• This will affect your credit score and loan borrowing capability for the short term, like 2-3 years.
• Credit card debt forgiveness, in some cases, will lead to lawsuits claiming non-payment of credit card debt.