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Is credit card debt forgiveness a good idea? Experts weigh in
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In the U.S., credit card debt is commonplace. In fact, household credit card debt across the country totaled $1.13 trillion during the fourth quarter of 2023. And, credit card balances increased by $50 billion from Q3 to Q4 2023, according to the Federal Reserve.
And, while credit cards can be useful financial tools, they can also cause financial hardship if you aren’t careful. After all, credit card accounts often have high interest rates and minimum payment structures that make it difficult to pay down what you owe.
But if you’re struggling with credit card debt, you have options for debt relief, including credit card debt forgiveness. With these programs, debt relief experts negotiate with your lenders to get them to accept a lesser amount of money than what you owe. If the program is successful, your lenders will forgive a portion of your debt — but are these programs a good idea? Here’s what the experts say.
Find out how a credit card debt forgiveness program can help you achieve debt relief now.
Is credit card debt forgiveness a good idea? Experts weigh in
Credit card debt forgiveness, “also known as debt negotiation or debt settlement, involves negotiating with creditors to reduce the outstanding balance on your credit card debt,” says Jordan Mangaliman, CEO of Goldline Financial Services. “While it can offer relief from overwhelming debt burdens, it also comes with pros and cons.”
Pros of credit card debt forgiveness
Here are the pros to be aware of with credit card debt forgiveness:
Potential debt reduction
“The primary advantage of debt settlement is that it can significantly reduce the total amount of debt you owe,” says Mangaliman. “Creditors may agree to accept a lump sum payment that is less than the total balance owed, allowing you to pay off your debt for less than you originally owed.”
That, in turn, can make it easier to pay off what you owe in a timely manner.
“You will be able to settle for less than what is owed,” says Brandon Robinson, president and founder of JBR Associates. “Sometimes considerably less.”
Learn more about your credit card debt forgiveness options today.
An expedited resolution
“Debt settlement can provide a quicker resolution to your debt problems compared to other debt relief options like debt consolidation or repayment plans,” says Mangaliman. “Once an agreement is reached, you can typically resolve your debts within a few months to a few years, depending on your financial situation.”
How quickly you can pay off what you owe, however, depends on how much you can afford to pay each month toward your remaining debts.
“After settling your debts, you’ll typically make a single lump sum payment or a series of payments to satisfy the negotiated settlement,” says Mangaliman. “This can simplify your finances and make it easier to manage your debt payments.”
Bankruptcy avoidance
“The user will be able to avoid a bankruptcy by getting the debt balance off the personal ledger sheet,” says Robinson.
And that makes credit card debt forgiveness a good alternative to bankruptcy in many cases.
“Debt settlement can be a viable alternative to bankruptcy for individuals who are unable to repay their debts,” says Mangaliman. “By negotiating with creditors to settle debts, you may be able to avoid the long-term negative consequences associated with bankruptcy, such as damage to your credit score and loss of assets.”
Cons of credit card debt forgiveness
And here are the potential negatives to be aware of with credit card debt forgiveness:
Credit score impact
Credit card debt forgiveness “can have a significant negative impact on your credit score,” says Mangaliman. “When you settle a debt for less than the full amount owed, it will typically be reported to credit bureaus as ‘settled’ or ‘settled for less than the full amount,’ which can lower your credit score and remain on your credit report for several years.”
The process of debt settlement also generally requires you to stop making payments to your lenders during negotiations, and the payment hold can continue for extended periods as you save for your settlement. These missed payments are also likely to have a negative impact on your credit score.
Potential tax implications
And, if a portion of your credit card debt is forgiven, it can also impact what you owe on your taxes.
“The IRS considers forgiven debt as taxable income, which means you have to pay taxes on the amount of debt forgiven through settlement,” says Mangaliman. “This can result in a substantial tax bill, depending on the amount of debt forgiven and your tax bracket.”
Other potential repercussions
There may also be other potential repercussions to consider in terms of the credit card debt forgiveness process. For example, your creditors aren’t required to agree to a settlement — and not all negotiations are successful.
“You may not get approval from the creditors to lower the amount owed,” says Robinson. “Some creditors may not negotiate a settlement with you.”
That, in turn, could result in legal action against you.
“While negotiating with creditors, there’s a risk that creditors may choose to pursue legal action against you to collect the full amount owed,” says Mangaliman. “Although this is not common, it’s a possibility that you should be aware of before pursuing debt settlement.”
Is credit card debt forgiveness a good idea?
In many cases, one of the best ways to determine whether credit card debt forgiveness makes sense is to consider the pros and cons and understand how it could impact your financial goals.
Credit card debt forgiveness programs are usually best for borrowers who are struggling with more credit card debt than they can pay off within the next few years. If that’s you, it could make sense to reach out to a debt relief expert for help.
The bottom line
Credit card debt forgiveness services can be a big help to those who are struggling to pay off what they owe — but they won’t be the right fit for every borrower. If you’re unsure whether this type of program makes sense for you, it may help to consider the potential benefits and downsides to this type of assistance to ensure it aligns with your financial goals — and that you can make the most of the services offered to you with these programs.
Renad Atallah is an unlikely internet sensation: a 10-year-old chef, with a repertoire of simple recipes, cooking in war-torn Gaza. She has nearly a million followers on Instagram, who’ve witnessed her delight as she unpacks parcels of food aid.
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We interviewed Renad via satellite, though we were just 50 miles away, in Tel Aviv. [Israel doesn’t allow outside journalists into Gaza, except on brief trips with the country’s military.]
“There are a lot of dishes I’d like to cook, but the ingredients aren’t available in the market,” Renad told us. “Milk used to be easy to buy, but now it’s become very expensive.”
I asked, “How does it feel when so many people like your internet videos?”
“All the comments were positive,” she said. “When I’m feeling tired or sad and I want something to cheer me up, I read the comments.”
We sent a local camera crew to Renad’s home as she made Ful, a traditional Middle Eastern bean stew. Her older sister Noorhan says they never expected the videos to go viral. “Amazing food,” Noorhan said, who added that her sibling made her “very surprised!”
After more than a year of war, the Gaza Strip lies in ruins. Nearly everyone has been displaced from their homes. The United Nations says close to two million people are experiencing critical levels of hunger.
Hamada Shaqoura is another chef showing the outside world how Gazans are getting by, relying on food from aid packages, and cooking with a single gas burner in a tent.
Shaqoura also volunteers with the charity Watermelon Relief, which makes sweet treats for Gaza’s children.
In his videos online, Shaqoura always appears very serious. Asked why, he replied, “The situation does not call for smiling. What you see on screen will never show you how hard life is here.”
Before dawn one recent morning in Israel, we watched the UN’s World Food Program load nearly two dozen trucks with flour, headed across the border. The problem is not a lack of food; the problem is getting the food into the Gaza Strip, and into the hands of those who desperately need it.
The UN has repeatedly accused Israel of obstructing aid deliveries to Gaza. Israel’s government denies that, and claims that Hamas is hijacking aid.
“For all the actors that are on the ground, let the humanitarians do their work,” said Antoine Renard, the World Food Program’s director in the Palestinian territories.
I asked, “Some people might see these two chefs and think, well, they’re cooking, they have food.”
“They have food, but they don’t have the right food; they’re trying to accommodate with anything that they can find,” Renard said.
Even in our darkest hour, food can bring comfort. But for many in Gaza, there’s only the anxiety of not knowing where they’ll find their next meal.
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Story produced by Mikaela Bufano. Editor: Carol Ross.
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“Sunday Morning” 2024 “Food Issue” recipe index
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It’s been said the best meals come from the heart, not from a recipe book. But at this USDA kitchen, there’s no pinch of this, dash of that, no dollops or smidgens of anything. Here, nutritionists in white coats painstakingly measure every single ingredient, down to the tenth of a gram.
Sheryn Stover is expected to eat every crumb of her pizza; any tiny morsels she does miss go back to the kitchen, where they’re scrutinized like evidence of some dietary crime.
Stover (or participant #8180, as she’s known) is one of some 10,000 volunteers enrolled in a $170 million nutrition study run by the National Institutes of Health. “At 78, not many people get to do studies that are going to affect a great amount of people, and I thought this was a great opportunity to do that,” she said.
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It’s called the Nutrition for Precision Health Study. “When I tell people about the study, the reaction usually is, ‘Oh, that’s so cool, can I do it?'” said coordinator Holly Nicastro.
She explained just what “precise” precisely means: “Precision nutrition means tailoring nutrition or dietary guidance to the individual.”
The government has long offered guidelines to help us eat better. In the 1940s we had the “Basic 7.” In the ’50s, the “Basic 4.” We’ve had the “Food Wheel,” the “Food Pyramid,” and currently, “My Plate.”
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They’re all well-intentioned, except they’re all based on averages – what works best for most people, most of the time. But according to Nicastro, there is no one best way to eat. “We know from virtually every nutrition study ever conducted, we have inner individual variability,” she said. “That means we have some people that are going to respond, and some people that aren’t. There’s no one-size-fits-all.”
The study’s participants, like Stover, are all being drawn from another NIH study program called All Of Us, a massive undertaking to create a database of at least a million people who are volunteering everything from their electronic health records to their DNA. It was from that All of Us research that Stover discovered she has the gene that makes some foods taste bitter, which could explain why she ate more of one kind of food than another.
Professor Sai Das, who oversees the study at Tufts University, says the goal of precision nutrition is to drill down even deeper into those individual differences. “We’re moving away from just saying everybody go do this, to being able to say, ‘Okay, if you have X, Y and Z characteristics, then you’re more likely to respond to a diet, and somebody else that has A, B and C characteristics will be responding to the diet differently,'” Das said.
It’s a big commitment for Stover, who is one of 150 people being paid to live at a handful of test sites around the country for six weeks – two weeks at a time. It’s so precise she can’t even go for a walk without a dietary chaperone. “Well, you could stop and buy candy … God forbid, you can’t do that!” she laughed.
While she’s here, everything from her resting metabolic rate, her body fat percentage, her bone mineral content, even the microbes in her gut (digested by a machine that essentially is a smart toilet paper reading device) are being analyzed for how hers may differ from someone else’s.
Nicastro said, “We really think that what’s going on in your poop is going to tell us a lot of information about your health and how you respond to food.”
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Stover says she doesn’t mind, except for the odd sounds the machine makes. While she is a live-in participant, thousands of others are participating from their homes, where electronic wearables track all kinds of health data, including special glasses that record everything they eat, activated when someone starts chewing. Artificial intelligence can then be used to determine not only which foods the person is eating, but how many calories are consumed.
This study is expected to be wrapped up by 2027, and because of it, we may indeed know not only to eat more fruits and vegetables, but what combination of foods is really best for us. The question that even Holly Nicastro can’t answer is, will we listen? “You can lead a horse to water; you can’t make them drink,” she said. “We can tailor the interventions all day. But one hypothesis I have is that if the guidance is tailored to the individual, it’s going to make that individual more likely to follow it, because this is for me, this was designed for me.”
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Story produced by Mark Hudspeth. Editor: Ed Givnish.
“Sunday Morning” 2024 “Food Issue” recipe index
Delicious menu suggestions from top chefs, cookbook authors, food writers, restaurateurs, and the editors of Food & Wine magazine.
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