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What are the pros and cons of credit card debt forgiveness?
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Credit card debt can be a hard issue to tackle, and it’s a compounding issue across the nation right now. Not only is consumer credit card debt growing at an annualized rate of nearly 5%, according to the Federal Reserve — but delinquent credit card debts are growing at around 8.5% annually.
As the number of consumers who can’t afford to make their credit card minimum payments grows, it makes sense for some to consider debt relief services to try and get credit card debt forgiven. Credit card debt forgiveness typically occurs as the result of a debt relief service known as debt settlement. With these services, debt relief experts negotiate with your creditors in an attempt to settle your debt for less than you owe.
When these negotiations are successful, a portion of your debt is forgiven, which can be a big help in some cases. However, if you’re considering a credit card debt forgiveness program, it’s important to consider the pros and cons first.
Tap into the debt relief you need now.
What are the pros of credit card debt forgiveness?
There are certain benefits to consider before you sign up for a debt settlement service, including:
Reduce the amount of money you owe to your credit card companies
One of the biggest benefits of credit card debt forgiveness is that it can result in a reduction of your principal credit card balance. As such, you could end up only paying back a portion of the debt you owe if the negotiations are successful.
Explore how debt settlement could help you with your credit card debt today.
You could save thousands of dollars over the life of your debt
Credit card debt is expensive. That’s especially true if you plan on making minimum payments for the life of your debt.
For example, if you made minimum payments on $10,000 in credit card debt at 24% interest, you would pay $19,332.21 in interest, for a total payoff cost of $29,332.21 (assuming your minimum payments are structured as 1% of the balance plus interest).
On the other hand, let’s say a successful debt settlement negotiation resulted in you paying only 50% of your principal balance. In this case, that’s $5,000.
You could get out of debt faster
Debt settlement companies typically work to get their customers out of debt in three to four years. That’s significantly less than the amount of time it would take to get out of debt by making minimum payments on your credit cards.
“You will have a system in place to systematically pay down the debt,” says Robinson. “You now have a plan to get out of debt faster.”
How much faster can you get out of debt with a debt settlement service? Using the same $10,000 debt at 24% as the example above, if your minimum payments were structured as 1% of your balance plus interest, it would take about 354 months for you to pay your debt off making only minimum payments. That’s 29.5 years.
Even if it took four years to pay your debt off through a credit card debt forgiveness program, you would save over 25 years of payments in the process.
You could get some stress relief
Struggling to make your minimum credit card payments can be stressful. However, “the mental stress of mounting debt will likely be relieved” when you enroll in a credit card debt forgiveness program, says Brandon Robinson, president and founder of JBR Associates.
What are the cons of credit card debt forgiveness?
There are also some potential downsides to consider, including:
Creditors don’t have to accept settlement offers
There’s no law requiring creditors to accept a settlement offer, so there’s a chance that your creditors will reject your offer. If this is the case, and negotiations are unsuccessful, you could end up having to pay your full balance plus the interest and fees that accrued as you saved for your settlement.
Credit card debt forgiveness could hurt your credit
There are a couple of aspects of credit card debt forgiveness programs that can damage your credit:
- You stop making payments to your creditors as you save for your settlement.
- Creditors typically report the debt as “settled” rather than “paid as agreed” on your credit report once it’s paid off. This shows that the creditor wasn’t able to collect on the full debt.
There will likely be tax implications
If your creditors write off the portion of your debt they’ve forgiven, you’ll likely have to report it as income when filing your taxes. This can increase your taxable income, increasing your tax burden for the year the settlement occurred.
The bottom line
Debt settlement programs are a compelling option if you want to pay your credit cards off quickly and have no other reasonable way out of your debt. However, as with any financial product, these services come with their own set of pros and cons. If you’re having a hard time making your credit card payments, though, debt forgiveness programs could provide the relief you need.
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Actor Danny Masterson, who is serving a sentence of 30 years to life in prison, is seeking to overturn his conviction for the rape of two women, with his attorneys arguing he did not receive a fair trial.
A Los Angeles jury found Masterson guilty last year of two counts of rape by force or fear for assaulting two women at his Hollywood Hills home in separate incidents in 2003 — during the same time he was starring on the Fox TV’s “That ’70s Show.” The jury deadlocked on the case involving a third alleged victim. The May 2023 trial followed a mistrial in November 2022.
Masterson, 48, is incarcerated at California Men’s Colony, a minimum- and medium-security prison in San Luis Obispo County.
Cliff Gardner, the attorney handling Masterson’s appeal, filed an appellant’s opening brief Tuesday that alleges witnesses told different versions of their stories over time. The brief also argues that evidence that would have helped Masterson’s defense was not presented due to what Gardner describes as erroneous rulings by the court. Gardner argues in the court filings that those factors support reversing the convictions.
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Masterson’s defense argued at trial that he knew both women socially and his sexual relations with them were consensual.
“It is true, of course, that a defendant is not entitled to a perfect trial. He is, however, still entitled to a fair one,” the brief reads. “Danny Masterson received neither. Reversal is required.”
During the trial, one of the women Masterson was later convicted of raping broke down on the witness stand as she testified that he choked her and smothered her with a pillow when she tried fighting back as he assaulted her, according to the Associated Press.
“I could not breathe,” she said, crying.
When the prosecutor asked what she was thinking at the time, she said she feared for her life, AP reported.
“That he was going to kill me,” she said. “That I was going to die.”
She later testified Masterson took out a gun from inside his bedside table and told her to be quiet when they heard voices at the door. She told jurors she was in and out of consciousness through the night.
Masterson and the victims were members of the Church of Scientology, which became a central focus of the case as the women alleged they were stalked and harassed after reporting the allegations to police.
They sued Masterson and the church years earlier in connection with those accusations.
During the trial, Deputy District Attorney Reinhold Mueller told jurors the church had retaliated against the victims for reporting the the crimes — the rape of a 28-year-old woman in April 2003 and assault of a 23-year-old woman, also that year.
“What happened after they were drugged, they were raped by this man over here,” Mueller said, as he pointed across the courtroom toward Masterson during closing arguments. “You have an opportunity to show there is justice. It does exist.”
The church released a statement at the time refuting the allegations.
“The church has no policy prohibiting or discouraging members from reporting criminal conduct of anyone, Scientologists or not, to law enforcement,” the statement reads. “Quite the opposite, church policy explicitly demands Scientologists abide by all laws of the land. All allegations to the contrary are totally false.”
In the newly filed brief for Masterson’s appeal, Gardner alleges the victims changed their stories “dramatically” over the years and had a financial motive to do so. Gardner argues in court documents that though the statute of limitations to file a lawsuit seeking damages had expired before the trial, under state law it would be revived if Masterson was convicted of forcible rape involving multiple victims.
Gardner says in the brief that a court ruling prevented evidence related to that argument from being admitted at trial.
He also states in the court filings that some witnesses died before the case went to trial, more than a decade after being reported to law enforcement, and alleges that police lost a tape-recorded witness interview that would have helped Masterson’s defense.
After the six-day trial resulting in Masterson’s convictions, one of the women he was convicted of raping released a statement saying she was relieved he had been found guilty.
“I am experiencing a complex array of emotions – relief, exhaustion, strength, sadness – knowing that my abuser, Danny Masterson, will face accountability for his criminal behavior,” said a statement from one of the women whom Masterson was convicted of raping at his home in 2003.