How to Get Out of Credit Card Debt Legally: A 5-Step Guide

Getting out of debt legally may mean repaying what you owe, asking for debts to be forgiven, or something in between.

credit card debt
Updated July 12, 2024
Here at MoneyFor, our goal is to help you make informed financial decisions. We are committed to accuracy and impartiality in all our content. It’s important to note that articles may reference products from our partners who compensate us. This influences which products we feature and their presentation on our site, not our evaluation.

Key takeaways

  • Learn how to quickly pay off credit card debt through consolidation, settlement, or debt management plans.
  • Stopping credit card payments has severe consequences.
  • Rebuilding your credit score and adopting better financial habits are essential for achieving long-term financial stability.

Get out of credit card debt legally and restart your financial life. It’s not easy paying off outstanding credit card balances, especially when they keep growing month after month. Interest rates are still going up, making it even harder to pay off what you owe.

The good news is that there are strategies to help you escape credit card debt. Some provide temporary financial relief, while others offer credit card forgiveness.

Read on if you want to know how to stop paying credit cards legally and become free.

Understanding credit card debt

Credit card debt is incredibly common. This is when you do not pay your credit card bill in full and instead carry a balance from month to month. This practice often results in high interest charges that make it challenging to pay off. According to the Federal Reserve Bank of New York, American credit card debt grew to $1.115 trillion in the first quarter of 2024.

Credit card companies are notorious for charging high interest rates. The average APR (annual percentage rate) is currently 21.51%. An interest rate this high can quickly escalate the total amount owed. Furthermore, creditors usually only require minimum payments that are 1% to 4% of your balance. Minimum credit card payments may seem reasonable. The catch is that the minimum payment charged by the credit card company often only covers the accrued interest and barely reduces the principal balance. This means that it will take you years of only paying the minimum to make a dent in what you owe.

The consequences of not paying credit card debt

Choosing to stop paying your credit card debts is usually not the answer. This action can have long-lasting and very serious consequences. When you first miss a payment, the credit card company will charge a late fee and a penalty APR (higher than the usual APR). Once your payment is over 30 days late, creditors will report it. It will go on your credit reports, drastically lowering your score.

If the account remains unpaid for an extended period, creditors will turn it over to a debt collector. Debt collectors are often more aggressive in their collection tactics and may take legal action to recover the money.

Understanding what happens when you stop paying credit cards emphasizes the importance of addressing outstanding balances proactively. Numerous credit card solutions are available to help you pay what you owe effectively and avoid these severe repercussions.

Alternatives to bankruptcy

When facing outstanding credit card debt, bankruptcy filing might seem like the only option, but there are viable alternatives to try first. One such alternative is negotiating a reduced payment, which can be an effective strategy for those seeking help with credit card debt over $10,000.

Debt settlement: A legal option

Debt settlement is when you or a third party negotiates with creditors to accept a lump sum payment that is less than the total amount you owe. This approach can be the quickest way to pay off credit card debt, especially if you’re dealing with large sums.

When you settle a bill for a reduced amount, your score will suffer. This is because you will have to stop making payments as you negotiate a settlement offer. If the forgiven amount is over $600, it is considered taxable income by the IRS. Additionally, if you work with a debt settlement company, they will charge a fee of 15% to 25% of the original amount.

Despite these drawbacks, debt settlement programs remain a legal and viable option.

Debt consolidation loan: A viable alternative

Debt consolidation is a popular method to pay off credit card debts efficiently and save money doing so. Consolidation simplifies the repayment process by merging multiple balances into a single loan with a lower interest rate.

Combining debts into one loan

You apply for a debt consolidation loan and use the new loan to pay the creditors you owe money to. You are then left with one more affordable monthly payment. The single bill will make it easier to manage your finances and less likely to miss payments.

Loans often have much lower APRs of only 8% to 12% on average. A consolidation loan can significantly reduce the amount of interest you pay. When you pay less interest, more of your payment goes toward the principal balance, helping you pay everything off faster.

Consolidation can be the ticket to a debt free future.

Learn how to consolidate debt without hurting your score!

Debt relief options

There are several effective ways to seek relief and get out of debt. A debt management plan (DMP) can be a good place to start.

Debt management plan (DMP)

A debt management plan (DMP) is a structured repayment plan facilitated by nonprofit credit counseling agencies to help individuals pay off their debt balances efficiently. When you enroll in a DMP, a credit counselor works with you to create a manageable budget and negotiate with your creditors. Often, the creditor agrees to reduced interest rates and waived fees, making your monthly payments more affordable.

DMPs consolidate everything you owe into one monthly payment, which you then pay to the agency. The agency distributes these payments to your creditors, ensuring timely payments and helping you avoid fees. This structured approach not only simplifies the repayment process but also helps improve your score over time by maintaining consistent payments.

Read more about debt consolidation!

If your debt is an insurmountable burden, your best option may be to stop paying altogether. Bankruptcy is a legal way to stop paying your credit card bills and seek credit card forgiveness, but it is considered a last resort and should be entered into carefully.

Bankruptcy: A last resort

credit card debt

For those wondering how to get rid of credit card debt without paying, filing bankruptcy may be the answer. Bankruptcy is a legal process that can eliminate your obligation to pay certain debts. A bankruptcy filing does not cover everything. Debts that are excluded include child support, alimony, and most back tax.

There are two main types of bankruptcy: Chapter 7 and Chapter 13. Chapter 7 (liquidation bankruptcy) involves selling certain assets to pay off creditors. Chapter 13 (reorganization bankruptcy) allows you to keep your assets while repaying dues over three to five years based on a court-approved payment plan.

When you file bankruptcy, an automatic stay goes into effect, which prevents creditors and debt collectors from contacting you and pursuing payment.

While bankruptcy can provide a fresh start, it should be considered only after exploring all other options and consulting with a bankruptcy attorney.

Got payday loans?

Try payday loan consolidation.

Taking action

Tackling old balances requires a hands-on approach. You cannot simply wait for them to go away. And there’s no realistic way to get out of credit card debt without paying.

Gathering information and creating a plan

The first step is to gather all relevant information. Collect your credit card statements and list your outstanding balances, APRs, and minimum payments. Also, take note of your income, expenses, and any other debts you may have. In order to develop an effective repayment plan, you need to understand how much you owe, how much you earn, and where you can cut back to find more money.

Next, create a realistic budget that prioritizes credit card debts while covering essential living expenses. See if you have enough money to repay the debts on your own or if you need more drastic help.

If you need further guidance, talk to a credit counselor. They can help you make a monthly budget and determine the best method for paying everything you owe.

9.7
Moneyfor score

Pay Back Less Than What You Owe

  • FREE Consultation
  • Reduce your debt
  • Lower Interest rates

Pay Back Less Than What You Owe

Apply Now
Review 12,985

Sticking to your plan

Once your plan is in place, it’s important to stick with it. Changing your plan can derail any progress you make. For instance, if you fail to make a monthly payment on a DMP, you may void the plan. Creditors may reinstate the original APR and fees the agency previously had gotten waived.

In order to get out of debt and stay out, it’s very important to avoid accumulating new credit card debt. Most people stop using their cards. Depending on the method you choose, you may be required to close accounts or your creditors may close them for you.

Avoiding scams

A few common red flags for debt relief scams include:

  • Upfront fees
  • Unsolicited calls, emails, or messages
  • Unrealistic promises such as quick fixes
  • Lack of transparency
  • High-pressure tactics and rushing you for a fast decision
  • Lack of licensing or accreditation

Always verify any company’s credentials and read reviews from the Better Business Bureau (BBB) before you sign up.

Rebuilding your credit score

Eliminating old balances is a significant achievement, but rebuilding your credit score is equally important. A higher score can open doors to better loan rates, housing options, lower insurance premiums, and more.

Credit scores are calculated by assessing the following factors:

  • Payment history
  • Amount used
  • Length of time you’ve had accounts
  • Mix of accounts
  • New inquiries

Building savings vs. paying creditors

Find out if it’s better to pay off debts or save money.

Payment history is the biggest factor in determining your score. You likely have a solid payment history if you went with a DMP or consolidation loan. However, if you chose bankruptcy or debt settlement, your payment history will need a lot of work.

Start by reviewing your credit report to ensure all debts settled or discharged are accurately reflected. Dispute any errors with the issuing bureau to prevent them from negatively impacting your score. You can get your credit report once a year for free at annualcreditreport.com.

Next, focus on establishing a history of timely payments. Consistently pay all your bills on time. It is also very important to keep your card usage low, below 30% of your limit. This shows lenders that you can be trusted to borrow money.

To maintain a good score, you will need to learn how to avoid credit card debt in the future. Adhere to a realistic budget so you can pay your bills on time and in full each month. Paying your balances in full will not only improve your score but will keep you out of debt.

By taking these steps, your score will improve and you can avoid owing money.

Frequently asked questions

1. What happens if I can’t afford to pay my credit cards anymore?

When you stop paying credit cards, the consequences can be severe. Initially, you’ll incur late fees, a penalty APR, and your score will drop. Eventually, your account will be sold to debt collectors who may take legal action in pursuit of payment.

2. Will I get sued if I stop paying my creditors?

Yes, creditors may eventually sue you to recover the money. Initially, they will attempt to collect through calls and letters, but if these efforts fail, they can file a lawsuit. If the court rules in their favor, they can garnish your wages or seize assets to satisfy the debt.

3. Can you be forced to pay credit card debt?

Yes, you can be forced to pay your debt through legal actions. If you fail to make payments, creditors can sue you and obtain a court judgment. This judgment allows them to garnish your wages, levy your bank accounts, or place liens on your property to collect the owed amount.

Bottom line

Managing and overcoming credit card debt can be challenging, but with the right strategies and support, it’s entirely possible. Some of the strategies discussed above will get you out of credit card debt without paying anything or a reduced amount but they can seriously hurt your score. Before you take drastic actions, explore consolidating or managing debt with professional help. You may be able to get out of credit card debt faster and for less.

If you’re determined to pay only a portion of what you owe, see if you can settle your debt or file bankruptcy. There are numerous ways to manage and reduce debt legally. Visit Moneyfor to find out more debt relief options.

Remember, achieving credit card forgiveness and financial stability requires patience, persistence, and informed decision-making. By taking the right steps now, you can pave the way for a debt-free future.

1. Paycheck Advance is For eligible customers only. Your actual available Paycheck Advance amount will be displayed to you in the mobile app and may change from time to time. Conditions and eligibility may vary and are subject to change at any time, at the sole discretion of Finco Advance LLC, which offers this optional feature. Finco Advance LLC is a financial technology company, not a bank. Expedited disbursement of your Paycheck Advance is an optional feature that is subject to an Instant Access Fee and may not be available to all users. Expedited disbursements may take up to an hour. For more information, please refer to Paycheck Advance Terms and Conditions.
2. Current is a financial technology company, not a bank. Banking services provided by Choice Financial Group, Member FDIC, and Cross River Bank, Member FDIC. The Current Visa® Debit Card is issued by Choice Financial Group pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. The Current Visa® secured charge card is issued by Cross River Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted. Please see the back of your Card for its issuing bank. Current Individual Account required to apply for the Current Visa® secured charge card. Independent approval required.
3. Individual results may vary. Using your credit card responsibly may allow you to improve your credit score. Credit building depends on various factors, including your payment history, credit utilization, length of credit history, and other financial activities.
4. Faster access to funds is based on comparison of traditional banking policies and deposit of paper checks from employers and government agencies versus deposits made electronically. Direct deposit and earlier availability of funds is subject to timing of payer’s submission of deposits.
5. Current is a financial technology company, not a bank. Banking services provided by Choice Financial Group. Funds held in Savings Pods are FDIC-insured on a pass-through basis up to $250,000 at our partner bank Choice Financial Group, member FDIC
6. Actual overdraft amount may vary and is subject to change at any time, at Current’s sole discretion. In order to qualify and enroll in the Fee-Free Overdraft feature, you must receive $500 or more in Qualifying Deposits into your Current Account over the preceding 30-day period. For more information, please refer to Fee-free Overdraft Terms and Conditions.
7. You may earn Points in connection with your everyday spending and by completing other actions that Current designates as subject to the Current Points Program. The amount of Points granted for different actions as well as the purchase requirements necessary to earn Points will vary, and is subject to Current’s sole discretion. After qualifying, please allow 3-5 business days for points to post to your Current account. The Current Points program is not available to Teen Account holders. See Current Points Terms and Conditions.
8. Some fees may apply, including out of network ATM fees of $2.50 per transaction, late payment fees of 3% of any total due balance outstanding and past due for two or more billing cycles, foreign transaction fees of 3% of the full transaction amount (minimum $0.50), card replacement fees per card of $5 for regular delivery and $30 for expedited delivery, cash deposit fees of $3.50 per deposit, and third party processing fees.
9. Boost Bonuses are credited to your Savings Pods within 48 hours of enabling the Boost feature and on a daily basis thereafter, provided that the Savings Pod has accrued a Boost Bonus of at least $0.01. The Boost rate on Savings Pods is variable and may change at any time. The disclosed rate is effective as of August 1, 2023. Must have $0.01 in Savings Pods to earn a Boost rate of either 0.25% or 4.00% annually on the portion of balances up to $2000 per Savings Pod, up to $6000 total. The remaining balance earns 0.00%. A qualifying direct deposit of $200 or more is required for 4.00%. No minimum balance required. For more information, please refer to Current Boost Terms and Conditions.
10. Cryptocurrency services are powered by Zero Hash LLC and Zero Hash Liquidity Services LLC, and may not be available in all states. Terms and conditions apply. When you buy or sell cryptocurrency, a difference between the current market price and the price you buy or sell that asset for is called a spread. However, unlike most other exchanges Current does not charge an additional trading fee. Cryptocurrency transactions are a form of investment, and all investments are subject to investment risks, including possible loss of the principal amount invested. Cryptocurrency is not insured by the FDIC or any other government-backed or third-party insurance. Your purchase of cryptocurrency is not a deposit or other obligation of, or guaranteed by, Choice Financial Group or Cross River Bank. The cryptocurrency assets in your Zero Hash account are not held at Current, Choice Financial Group, or Cross River Bank. Current, Choice Financial Group, and Cross River Bank are not responsible for the cryptocurrency assets held in any Zero Hash account. Neither Current, Choice, nor Cross River Bank is involved in the purchase, sale, exchange of fiat funds for cryptocurrency, or custody of the cryptocurrencies. Terms and Conditions apply (platform and user agreements). Crypto on Current is not currently available in HI. Licensed to engage in Virtual Currency Business Activity by the New York State Department of Financial Services. This does not constitute investment advice.
11. Current is a financial technology company, not a bank. Banking services provided by Choice Financial Group. Your money is FDIC-insured on a pass-through basis up to $250,000 at each of our partner banks, Choice Financial Group and Cross River Bank, members FDIC.
12. Average value based on Fine Hotels + Resorts bookings in 2023 for stays of two nights. Benefits include daily breakfast for two, room upgrade upon arrival when available, $100 amenity, guaranteed 4PM late checkout, and noon check-in when available. Certain room categories not eligible for upgrade. $100 amenity varies by property. Actual value will vary based on property, room rate, upgrade availability, and use of benefits.
13. Up to $500 per Covered Trip that is delayed for more than 6 hours; and 2 claims per Eligible Card per 12 consecutive month period. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by New Hampshire Insurance Company, an AIG Company.
14. The maximum benefit amount for Trip Cancellation and Interruption Insurance is $10,000 per Covered Trip and $20,000 per Eligible Card per 12 consecutive month period. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by New Hampshire Insurance Company, an AIG Company.
15. Baggage Insurance Plan coverage can be in effect for Covered Persons for eligible lost, damaged, or stolen Baggage during their travel on a Common Carrier Vehicle (e.g. plane, train, ship, or bus) when the Entire Fare for a ticket for the trip (one- way or round-trip) is charged to an Eligible Card. Coverage can be provided for up to $2,000 for checked Baggage and up to a combined maximum of $3,000 for checked and carry-on baggage, in excess of coverage provided by the Common Carrier. The coverage is also subject to a $3,000 aggregate limit per Covered Trip. For New York State residents, there is a $2,000 per bag/suitcase limit for each Covered Person with a $10,000 aggregate maximum for all Covered Persons per Covered Trip. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company.
16. Car Rental Loss and Damage Insurance can provide coverage up to $75,000 for theft of or damage to most rental vehicles when you use your eligible Card to reserve and pay for the entire eligible vehicle rental and decline the collision damage waiver or similar option offered by the Commercial Car Rental Company. This product provides secondary coverage and does not include liability coverage. Not all vehicle types or rentals are covered. Geographic restrictions apply. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company. Car Rental Loss or Damage Coverage is offered through American Express Travel Related Services Company, Inc.
17. Coverage for a Stolen or damaged Eligible Cellular Wireless Telephone is subject to the terms, conditions, exclusions, and limits of liability of this benefit. The maximum liability is $800, per claim, per Eligible Card Account. Each claim is subject to a $50 deductible. Coverage is limited to two (2) claims per Eligible Card Account per 12 month period. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by New Hampshire Insurance Company, an AIG Company.
18. When an American Express® Card Member charges a Covered Purchase to an Eligible Card, Extended Warranty§ can provide up to one extra year added to the Original Manufacturer’s Warranty. Applies to warranties of five (5) years or less. Coverage is up to the actual amount charged to your Card for the item up to a maximum of $10,000; not to exceed $50,000 per Card Member account per calendar year. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company.
19. Purchase Protection is an embedded benefit of your Card Membership and requires no enrollment. It can help protect Covered Purchases made on your Eligible Card when they’re accidentally damaged, stolen, or lost, for up to 90 days from the Covered Purchase date. The coverage is limited to up to $10,000 per occurrence, up to $50,000 per Card Member account per calendar year. Coverage Limits Apply. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company.
20. Chime is a financial technology company, not a bank. Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC.
21. The secured Chime Credit Builder Visa® Card is issued by Stride Bank, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted.
22. Banking services and debit card provided by The Bancorp Bank N.A. or Stride Bank, N.A., Members FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted.
23. The Annual Percentage Yield (“APY”) for the Chime Savings Account is variable and may change at any time. The disclosed APY is effective as of September 20, 2023. No minimum balance required. Must have $0.01 in savings to earn interest.
24. There’s no fee for the Chime Savings Account. Cash withdrawal and Third-party fees may apply to Chime Checking Accounts. You must have a Chime Checking Account to open a Chime Savings Account.
25. To apply for Credit Builder, you must have received a single qualifying direct deposit of $200 or more to your Chime Checking Account. The qualifying direct deposit must be from your employer, payroll provider, gig economy payer, or benefits payer by Automated Clearing House (ACH) deposit OR Original Credit Transaction (OCT). Bank ACH transfers, Pay Anyone transfers, verification or trial deposits from financial institutions, peer to peer transfers from services such as PayPal, Cash App, or Venmo, mobile check deposits, cash loads or deposits, one-time direct deposits, such as tax refunds and other similar transactions, and any deposit to which Chime deems to not be a qualifying direct deposit are not qualifying direct deposits.
26. Money added to Credit Builder will be held in a secured account as collateral for your Credit Builder Visa card, which means you can spend up to this amount on your card. This is money you can use to pay off your charges at the end of every month.
27. Based on a representative study conducted by Experian®, members who made their first purchase with Credit Builder between June 2020 and October 2020 observed an average FICO® Score 8 increase of 30 points after approximately 8 months. On-time payment history can have a positive impact on your credit score. Late payment may negatively impact your credit score.
28. On-time payment history may have a positive impact on your credit score. Late payment may negatively impact your credit score. Chime will report your activities to Transunion®, Experian®, and Equifax®. Impact on your credit may vary, as Credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.
29. Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. We generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date.
30. SpotMe® on Debit is an optional, no fee overdraft service attached to your Chime Checking Account. To qualify for the SpotMe on Debit service, you must receive $200 or more in qualifying direct deposits to your Chime Checking Account each month and have activated your Visa debit card. Qualifying members will be allowed to overdraw their Chime Checking Account for up to $20 on debit card purchases and cash withdrawals initially but may later be eligible for a higher limit of up to $200 or more based on Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors. The SpotMe on Debit limit will be displayed within the Chime mobile app and is subject to change at any time, at Chime’s sole discretion. Although Chime does not charge any overdraft fees for SpotMe on Debit, there may be out-of-network or third-party fees associated with ATM transactions. SpotMe on Debit will not cover any non-debit card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. SpotMe on Debit Terms and Conditions.
31. Tipping or not tipping has no impact on your eligibility for SpotMe®.
32. Out-of-network ATM withdrawal fees may apply except at MoneyPass ATMs in a 7-Eleven, or any Allpoint or Visa Plus Alliance ATM.
33. Save When I Get Paid automatically transfers 10% of your direct deposits of $500 or more from your Checking Account into your savings account.
34. Round Ups automatically round up debit card purchases to the nearest dollar and transfer the round up from your Chime Checking Account to your savings account.
35. Mobile Check Deposit eligibility is determined by Chime in its sole discretion and may be granted based on various factors including, but not limited to, a member’s direct deposit enrollment status.
36. Funds are automatically debited from your Checking Account and typically deposited into the recipient’s Checking Account within seconds. Pay Anyone transactions will be monitored and may be held, delayed or blocked if the transfer could result in fraud or another form of financial harm. Sometimes instant transfers can be delayed.
37. Pay Anyone transactions will be monitored and may be held, delayed or blocked if the transfer could result in fraud or another form of financial harm. Sometimes instant transfers can be delayed. Non-Chime members must use a valid debit card to claim funds.
* EarnIn is not available for Connecticut residents

About the author

Rachel Alulis

Rachel Alulis has been the lead editor for Moneyfor’s credit cards team since 2015 and for the financial rewards team since 2023. Before joining Moneyfor, Rachel worked at USA Today and the Des Moines Register. She then established a successful freelance writing and editing business specializing in personal finance. Rachel holds a bachelor’s degree in journalism and an MBA.