How to know when credit card debt forgiveness is the wrong call (and what to do instead)
Summary
Many people are having trouble paying off credit card debt, which has now reached $1.23 trillion in total. Debt forgiveness, where you pay less than you owe and the rest is forgiven, can help some people but is not the best choice for everyone. It can harm your credit score, cause tax bills, and include fees, so it's important to know when to consider other options.Key Facts
- Credit card debt in the U.S. is at a record $1.23 trillion.
- Almost half of cardholders carry balances month to month, causing interest to add up.
- Debt forgiveness means negotiating to pay a smaller amount and closing the debt.
- This option usually applies to those who have missed payments for 90 days or more.
- Debt forgiveness may not be good if your debt is under $7,500 or if you are still making minimum payments.
- Forgiven debt over $600 can be taxed as income by the IRS.
- Debt forgiveness programs charge fees from 15% to 25% of your debt balance.
- Using debt forgiveness can lower your credit score, especially if your credit is still good.
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