Credit Card Debt Forgiveness

Pay less than what you owe and get out of debt faster with the Credit Card Debt Forgiveness program from InCharge. Also known as the Less Than Full Balance Program, this form of nonprofit debt settlement combines your credit card bills into one fixed monthly payment that is far less than what you originally owed, so you can be debt free in 36 months.

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Kevin Briggs was a successful landlord with a six-figure income, but after a year of pandemic challenges, he found himself in 2021 with $45,000 in credit card debt.

“I was in debt way over my head,” Briggs said. “It felt like I was about to lose everything. But then I got rescued.”

Less than three years later, Briggs had eliminated his credit card debt, thanks to that rescue – a new nonprofit debt relief program from InCharge Debt Solutions called “Credit Card Debt Forgiveness.”

Credit Card Debt Forgiveness, also known as the Less Than Full Balance program, is debt relief for people who have not been able to make credit card payments for six months and creditors have charged off their accounts, or are about to. The program settles credit card debt for less than what’s owed, but without many of the financial drawbacks of for-profit debt settlement.

The catch is that nonprofit Credit Card Debt Forgiveness isn’t for everyone. To qualify, you must not have made a payment on your credit card account, or accounts, for 120-180 days. In addition, not all creditors participate, and it’s only offered by a few nonprofit credit counseling agencies. InCharge Debt Solutions is one of them.

Briggs, with help from InCharge, reduced his $45,000 credit card debt load to $23,000, and eliminated the debt in less than the 36-month limit of the program.

“The highlight of the program for me was that it stopped the debt collectors from calling and harassing me all day and night,” Briggs said. “The other highlight was the attitude of the counselor that we could get this done. I was feeling like it wasn’t going to happen, but she kept with me, and we got it done.”

What Is the Credit Card Forgiveness Program?

The Credit Card Forgiveness Program is for people who are so far behind on credit card payments that they are in serious financial trouble, possibly facing bankruptcy, and don’t have the income to catch up.

“The program is specifically designed to assist clients whose accounts have been charged off,” Mostafa Imakhchachen, customer care specialist at InCharge Debt Solutions, said.

That means creditors have written off the accounts, or are about to, which usually happens after 120-180 days without a payment. Creditors who participate have agreed with the nonprofit credit counseling agency to accept 50%-60% of what is owed in fixed monthly payments over 36 months.

The fixed payments mean you know exactly how much you’ll pay over the repayment period. No interest is charged on the balances during the payoff period, so the payments and amount owed don’t change.

Once the agreement is reached, creditors in the program stop debt collection action, so there won’t be any more calls or letters from debt collectors.

As an example, let’s say you owe $50,000 in credit card debt and are accepted in the Credit Card Debt Forgiveness program with a settlement amount of $25,000. You pay $25,000, plus a small monthly fee, in fixed monthly payments over 36 months.

The fact you haven’t paid the full among that you owe doesn’t go unnoticed by the credit rating bureaus. Your credit score will take a hit. But it does show you’re taking an active role in reducing your debt. Since your account was already way behind and charged off, your credit score was already taking a hit.

After settlement, the account will be reported as paid with a zero balance, rather than outstanding with a collections company.

It’s all right to pay it off early, but it won’t be extended beyond the 36 months.

How Did the Credit Card Forgiveness Program Begin?

The list of choices for people seeking debt relief has been consistent for some time – debt management, debt consolidation, debt settlement or bankruptcy. Credit Card Debt Forgiveness was added to the menu in 2021, created by nonprofit credit counseling agencies that were looking for a solution for debt-overwhelmed consumers who didn’t qualify for debt management or other debt consolidation.

It’s a form of nonprofit debt settlement, but without some of the drawbacks of the for-profit version. Nonprofit credit counseling agencies are fiduciaries, which means they’re required by law to act in your best interest, and the program is designed so that it costs people who are already in financial hardship a fraction of what they owe. It costs less because creditors have agreed to participate, so there’s no negotiation involved, which means it happens faster. Creditors have also agreed not to charge interest on what’s owed during the payment period.

Because the program is relatively new, only a few nonprofit credit counseling agencies offer the program, and a limited number of credit card companies and banks participate.

How Does the Credit Card Debt Forgiveness Program Work?

Credit Card Debt Forgiveness is one part debt management, one part debt consolidation and one part debt settlement – all designed so that you have no part of bankruptcy.

The forgiveness agreement requires you to make a fixed monthly payment (like debt management), on a debt that combines credit card bills (like debt consolidation) for an amount that is far less than what you originally owed (like debt settlement).

The first step is to call a nonprofit credit counseling agency like InCharge Debt Solutions and talk to a certified counselor. The counselor will review your finances with you to determine if the program is the right option. The review will include a look at your monthly income and expenses. The agency will pull a credit report to understand what you owe and the extent of your hardship.

If the forgiveness program is the best solution, the counselor will send you an agreement that details the plan, including the amount of the monthly payment. The credit card company, or companies, will also be asked by the counselor to sign off on the plan.

Once everyone agrees, you start making monthly payments on a 36-month plan. When it’s over, the agreed-to amount is eliminated. There’s no penalty for paying off the balance early, but no extensions are allowed. If you miss a payment, the agreement is nullified, and you must exit the program.

If you think it’s a good option for you, call a counselor at a nonprofit credit counseling agency like InCharge Debt Solutions, who can answer your questions and help you determine if you qualify.

Qualifications for the Credit Card Debt Forgiveness Program

Having a lot of credit card bills and struggling to make monthly payments is definitely a problem, but it’s not enough to qualify for Credit Card Debt Forgiveness. Because the program allows borrowers to settle for less than what they owe, the creditors who participate want reassurance that those who take advantage of it would not be able to pay the full amount.

Your credit card accounts also must be from banks and credit card companies that have agreed to participate. The good news is that participating creditors include some of the biggest credit card companies and banks that back credit cards: Chase, Bank of America, Wells Fargo, Synchrony, Resurgent, and Portfolio Recovery. Even if your credit card seems to be from a different source, check your monthly statement to see if it is actually provided by a participating bank.

Four Conditions to Participate in the Credit Card Debt Forgiveness Program

There are strict requirements to qualify for a nonprofit Credit Card Forgiveness program:

  • Your creditor(s) must be on the list of those that have agreed to participate.
  • Your account(s) must be charged off, meaning you haven’t made a payment in 120-180 days, depending on the creditor.
  • Balance must be at least $1,000.
  • Agreed-the balance must be paid off in 36 months. There are no extensions.

What Happens If I Miss a Payment?

If you miss a payment – that’s just one missed payment – the agreement is terminated. Your creditor(s) will cancel the plan and your balance goes back to the original amount, minus what you’ve paid while in the program.

Why Can’t I Participate If I’m Already Paying on My Account?

Credit Card Debt Forgiveness programs are for delinquent accounts, meaning those that have not been paid in 120 -180 days and have been written off by creditors, or are about to be. If you have an active account, meaning you’ve made a payment in the last six months, there are other debt relief solutions that can help you get back on track and pay what you owe your creditors. Participating credit card companies don’t want to settle for less than they’re owed unless they’re sure they wouldn’t get the money otherwise.

Traditionally, credit card companies sell delinquent accounts to debt collection agencies for pennies on the dollar after they make every effort to convince you to pay. With the forgiveness program, the creditor can instead choose to keep your debt on the books and recoup 50%-60% of what they are owed.

How Does Credit Card Forgiveness Compare with Debt Settlement?

Nonprofit Credit Card Debt Forgiveness and for-profit debt settlement are similar in that they both provide a way to settle credit card debt by paying less than what is owed. But the way they go about it is different. Credit card forgiveness is designed to cost the consumer less, pay off the debt quicker, and have fewer drawbacks than its for-profit counterpart.

Some key areas of difference between Credit Card Debt Forgiveness and for-profit debt settlement are:

Creditor Participation: Credit Card Debt Forgiveness programs have relationships with creditors who have agreed to participate. Clients who have accounts with participating banks and credit card companies will find out right away if the creditor has agreed to accept the lower payment. Once they do, the payoff period begins immediately. For-profit debt settlement programs negotiate with each creditor, usually over a 2-3-year period, while interest, fees and calls from debt collectors continue. This means a bigger hit on your credit report and credit score, and an increasing balance until negotiation is completed. Since it’s a negotiation, creditors don’t have to agree to a for-profit debt settlement deal.

Payments: Credit Card Debt Forgiveness clients make 36 equal monthly payments to eliminate their debt. The payments go to the creditors until the agreed-to balance is eliminated. No interest is charged during that period. For-profit debt settlement clients pay into an escrow account over a negotiation period toward a lump sum that will be paid to creditors. The monthly payments typically take 2-3 years. During this time, fees may increase, and interest accrues, so payments may end up not being affordable for clients. Meanwhile, clients stop making payments to their credit card accounts. Calls from debt collectors continue and creditor-reported non-payments continue to damage the client’s credit report.

Debt collection: Enrollment in a Credit Card Debt Forgiveness stops calls and letters from debt collection and recovery agencies for the accounts included in the program. It also stops any lawsuits filed in an attempt to collect the debt. For-profit debt settlement programs don’t stop collection actions until the lump-sum payment is made to the creditor.

Fees: Nonprofit Credit Card Debt Forgiveness programs will tell you up front what the monthly fee is, capped at $75, or less, depending on what state you live in. For-profit debt settlement companies may not be clear about fee amounts, which often are a percentage of the balance.

Credit score damage: Nonprofit Credit Card Debt Forgiveness will hurt your credit score, since you won’t pay the full amount that you owe. For-profit debt settlement likely will hurt it more, since you won’t be paying creditors during the 2-3 year negotiation/escrow period, but they haven’t agreed to a plan or received any money, so they’re still reporting nonpayment. This is on top of the credit score hit from not paying the full amount. In both cases, the IRS will collect income tax on the portion of the balance forgiven, if it’s more than $600.

Scams: Debt relief solutions from a certified nonprofit credit counseling agency are safe and designed to be in your best interest. While many for-profit debt settlement companies are legitimate and follow the rules, there are also scams out there, designed to lure people who are in desperate financial straits and seeking a way to get out. Be wary of any “debt relief” company that contacts you, rather than you reach out; charges upfront fees before acting; or doesn’t review your financial situation with you the way a certified credit counselor would.

How Does Credit Card Debt Forgiveness Compare to Credit Card Consolidation?

Credit Card Debt Forgiveness is for consumers who have credit card accounts that have been charged off, and the consumer is in dire financial trouble because of it.

Credit card consolidation is for people who haven’t reached that point. Credit card consolidation is an umbrella term for any debt relief method that combines multiple credit card payments into one single monthly payment. Having a single monthly payment is easier than juggling several credit card bills. In most cases, debt consolidation also comes with a lower interest rate than what you were paying on your credit cards, making the monthly costs, as well as overall costs, less.

Credit card debt consolidation’s most common forms are debt management plans, debt consolidation loans, or a zero-interest transfer credit card.

People who qualify for any of those forms of credit card debt consolidation are in better financial shape than someone who qualifies for nonprofit Credit Card Debt Forgiveness. To get a debt consolidation loan or a zero-interest balance transfer credit card, you need a credit score of at least 680. In most cases higher. If your accounts are charged off, your credit score is likely well below that.

Credit score isn’t a factor for debt management program, but you need a sufficient income to be able to make a monthly payment that will cover all of the accounts included in the program. In addition, some of the credit accounts that would be included may not be from companies that participate in Credit Card Debt Forgiveness.

How Does Credit Card Debt Forgiveness Compare to Bankruptcy?

Bankruptcy is the last resort for someone who has more debt than they can pay. Nonprofit Credit Card Debt Forgiveness won’t eliminate nearly as much debt as bankruptcy does, but it also has less of the long-lasting negative financial impact bankruptcy carries. It can be the step you take in order to avoid bankruptcy.

Some of the ways that Credit Card Debt Forgiveness compares to bankruptcy are:

Debt elimination: Credit Card Forgiveness will eliminate 40%-50% of what you owe on credit card accounts. Bankruptcy will eliminate all eligible unsecured debt.

Credit impact: Credit Card Debt Forgiveness will have a negative impact on your credit score since full balances on accounts were not paid. But once you’ve completed the program, the accounts will show a zero balance, not that you still owe money. Bankruptcy will have a much more severe negative impact on your credit report, making it difficult to get a mortgage, car loan, or other needed credit in the years that follow. It may also have a negative impact on insurance premiums, your ability to sign a lease on an apartment, and even employment opportunities. Bankruptcy remains on your credit report for 7-10 years.

Application/qualification process: You fill find out if you qualify for Credit Card Debt Forgiveness by calling a nonprofit credit counseling agency or applying online. You’ll be asked to provide income and expense information, as well as access to your credit report. Bankruptcy involves a complex application period, extensive documentation, and a court action before you are approved. There are also filing fees and other expenses.

Timeline: Credit Card Debt Forgiveness payments begin as soon as you’re accepted into the program. Bankruptcy approval and discharge can take 6-12 months.

Debt collections: Collection actions and lawsuits on Credit Card Debt Forgiveness clients are stopped once creditors agree to the plan. Filing for bankruptcy triggers an automatic stay on collection actions and lawsuits, and offers protection from harassment by creditors, but if the court doesn’t approve the bankruptcy, those will start up again.

Privacy: A Credit Card Debt Forgiveness settlement is between you, the credit counseling agency, your creditors, and potential creditors who you allow to access to your credit report. A bankruptcy is public information that anyone can access.

Additional Information About Debt Relief

If you are overwhelmed by credit card debt and are having trouble making payments or would like more information on how to deal with or eliminate credit card debt, InCharge Debt Solutions has many resources that can help.

Some of the debt relief topics InCharge can help you with are:

If you need help with credit card debt, calling a counselor at a nonprofit credit counseling agency, like InCharge Debt Solutions is free of charge. The counselor can help put your situation in perspective, help you create a budget, point you to resources and discuss debt-relief options that include Credit Card Debt Forgiveness, debt management plans, debt consolidation, debt settlement and bankruptcy.

About The Author

Tom Jackson

Tom Jackson focuses on writing about debt solutions for consumers struggling to make ends meet. His background includes time as a columnist for newspapers in Washington D.C., Tampa and Sacramento, Calif., where he reported and commented on everything from city and state budgets to the marketing of local businesses and how the business of professional sports impacts a city. Along the way, he has racked up state and national awards for writing, editing and design. Tom’s blogging on the 2016 election won a pair of top honors from the Florida Press Club. A University of Florida alumnus, St. Louis Cardinals fan and eager-if-haphazard golfer, Tom splits time between Tampa and Cashiers, N.C., with his wife of 40 years, college-age son, and Spencer, a yappy Shetland sheepdog.


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