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Can I wipe my credit card debt without paying?
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Many Americans are feeling the financial squeeze from multiple directions right now. For starters, stubbornly high inflation, which is currently running at around 3.5%, has driven up the cost of essentials like food, housing and energy. And, the Federal Reserve has been keeping its benchmark rate at a 23-year high in an effort to get inflation under control, which is causing consumer borrowing rates to be elevated, too. This high-rate environment has, in turn, made borrowing more expensive for things like mortgages, auto loans and credit cards.
For households that are already struggling to make ends meet, this combination of high inflation and elevated interest rates can have a severe impact. When the bills keep piling up but income isn’t keeping pace, it can lead you to turn to credit cards as a stopgap just to cover basic living expenses. And, before you know it, you’ve racked up substantial credit card balances that become increasingly difficult to pay down as the interest charges compound.
It’s no wonder that in this difficult economic environment, those who are saddled with mounting credit card debt may start looking for any lifeline or innovative way to get out from under that burden. And, some may even go so far as to explore the possibility of wiping out their credit card debt entirely without paying what they owe. But is that really possible? And, if so, what are the potential consequences?
Need extra help with your credit card debt? Compare your top debt relief options here.
Can I wipe my credit card debt without paying?
The short answer is yes, there are a couple of ways you can technically get out of paying your credit card debt entirely. However, these options come with major downsides and should really only be considered as an absolute last resort. That said, your options for doing so include:
Filing for bankruptcy
The most straightforward way to have your credit card debt legally forgiven is to file for bankruptcy. When you file for Chapter 7 bankruptcy, commonly known as liquidation bankruptcy, your assets above certain exempt amounts are sold off to repay as much of your debt as possible. Any remaining unsecured debts, like credit cards, are then discharged, meaning you are no longer legally obligated to pay them.
While this allows you to start with a clean slate, the bankruptcy itself will remain on your credit report for seven to 10 years, making it extremely difficult to get approved for new credit or loans during that time. It can also limit your housing options or make it harder to get hired for certain jobs. Those types of consequences should make bankruptcy the last option for many people.
Find out what the right debt relief solution is for you now.
Opting for debt settlement or debt forgiveness
Another potential option to wipe out credit card debt without paying the full amount is to negotiate what’s known as a debt settlement with your creditors. In this process, you stop making monthly payments and instead negotiate with the credit card companies — either directly or through a debt settlement company representing you — to pay a lump sum that is less than the full balance in exchange for them forgiving the remaining amount.
This option won’t allow you to wipe away your credit card debt completely without paying anything out of pocket. That said, creditors are sometimes willing to accept these reduced payoff amounts, especially if you demonstrate a true inability to pay and the debt has gone into default status.
The catch is that the forgiven portion of the debt is treated as taxable income, so you’ll likely owe income taxes on that portion of your debt. You’ll also typically see a negative impact on your credit score, which will make borrowing more difficult and expensive in the future.
Other options for wiping your credit card debt
Outside of bankruptcy or debt settlement, there are really no other ways to completely wipe away credit card debt without paying. Making minimum payments and slowly chipping away at the balance is the norm for most people in debt, and that may be the best option in many situations.
However, there are some alternatives that can provide temporary relief and get you on a path to paying off the debt in full. These include:
- Debt management plans: When you enroll in a debt management plan, the debt relief agency you work with may be able to negotiate lower interest rates, waived fees or alternate payment plans with creditors on your behalf. This can make the debt more manageable to pay off in full.
- Debt consolidation loans: Debt consolidation loans allow you to combine multiple credit card balances into one new fixed-rate loan, ideally with a lower interest rate than the cards. You still pay the full principal, but the savings on interest can speed up the payoff process.
- Balance transfer cards: Balance transfer cards with 0% intro APR promotions allow you to move your debt to a new card without interest charges for the first 12 to 18 months. This interest-free window allows more of your payment to go to the principal.
The bottom line
Wiping out credit card debt entirely without any consequences or obligation to eventually pay is essentially impossible outside of bankruptcy. While that can certainly provide a fresh start, it comes with immense costs and negative impacts that can take years to recover from.
For most people, finding ways to responsibly pay off their credit card debt over time through a combination of budgeting, negotiating with creditors, debt consolidation and measured use of balance transfers is a better choice. It preserves your credit rating and avoids the financial implications of options like bankruptcy or debt settlement. And, with some diligence and perseverance, that nagging credit card debt can be overcome through commitment rather than avoidance.
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These days, you’ll find Peggy Noonan in many places: in front of commencement crowds, at political round tables, and for the past quarter-century, in the opinion section of the Wall Street Journal. But when she was just starting out in Washington, D.C., you could find Noonan at the Off the Record Bar, near her job at the White House. “I would sit over there by myself, I would order a beer or a glass of wine, and I’d just quietly sit and read,” she said.
In 1984, Noonan joined President Ronald Reagan’s staff, after working at CBS in New York. At first, she felt like an outsider in the buttoned-up West Wing, but soon became an acclaimed speechwriter. Early on, she wrote Reagan’s moving speech for D-Day’s 40th anniversary.
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Then, when the Challenger shuttle tragically exploded, Noonan was given a tough assignment: write Reagan’s address to a distraught nation. “I had a feeling of, that didn’t work, nothing worked, because nothing was worthy of that moment; nothing was worthy of that day,” she said. “But then Frank Sinatra called – he called that night to the White House to say, ‘Mr. President, you just said what needed to be said.’ And Frank didn’t call after every speech!”
By the late eighties, Noonan had cemented a reputation as a wordsmith, and Reagan turned to her for his farewell address:
“We made the city stronger, we made the city freer. All in all, not bad, not bad at all.”
George H.W. Bush turned to Noonan, too, as he rallied Republicans on his way to the White House. “You know, part of life is luck,” she said. “It was not lucky to follow dazzling Ronald Reagan and be plainer, seeming sturdy George H.W. Bush. But I believe history was not – certainly in his time – sufficiently fair to him.”
That opinion is one of many found in the pages of her new book, “A Certain Idea of America,” a collection of her recent work (to be published Tuesday by Portfolio).
Portfolio
Asked what her idea of America is today, Noonan replied, “Big, raucous, troubled, frayed.”
Noonan’s columns often delve into questions of character and leadership. “What I do not perceive now is many politicians who are actually saying, Guys, this is not good for the country. We’ve been given this beautiful thing called America. Shine it up! Keep it going!”
Costa said, “You have a lot of fun in this book, doing what you call taking the stick to certain people from time to time.”
“I don’t mind the stick at all,” said Noonan. “When I see something that I think is just awful, I love to get mad at it. I got mad at John Fetterman.”
“You don’t like that he’s wearing shorts?”
“It’s okay with me that he wears shorts,” she replied, “but he is not allowed to change the rules of the U.S. Senate to accommodate him in his little shorts and hoodie because he enjoys dressing like a child.”
Noonan, now 74, grew up in the Democratic strongholds of New York and New Jersey. “And I was very happy with that, because Democrats were cooler than Republicans,” she said. “Democrats were little Bobby Kennedy, and Republicans were, like, Dick Thornburgh!”
But in Reagan, she saw something fresh. “You looked at him, you saw his confidence, and it made you feel optimistic,” she said.
The Gipper, of course, no longer dominates the Republican Party, and President-elect Trump’s victory could transform the GOP even more in the coming years. “In terms of policy, the Republican Party has changed by becoming, not a standard, usual conservative party, but a populist party,” Noonan said. “Its issues have changed very much. But also, the edge of anger and resentment and, I’m afraid, a little paranoia that is in the Republican Party now would be something that Reagan did not recognize.”
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At the Off the Record Bar, the faces on the wall – caricatures of politicians of the past – and at the tables still catch her eye. For Noonan, it’s all part of the story – America’s, and her own.
Costa said, “In a way, you’re still the writer in the corner watching everybody at the bar in Washington.”
“Yeah, I like to watch them, she said. “They’re human, and you bring a little warmth to it, a little humor, and always bring your stick and smack them when you need to! It’s kind of nice.”
READ AN EXCERPT: “A Certain Idea of America” by Peggy Noonan
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Story produced by David Rothman. Editor: Joseph Frandino.
