How much of your credit card debt can be forgiven?

The past few years have resulted in increased financial strain for many Americans, with the economic challenges piling up faster than many people's paychecks can keep pace. Between stubborn inflation and the elevated interest rates meant to temper it, many households have been struggling to maintain their standard of living.

One of the most significant factors, though, has been the dramatic increase in the price of essentials. According to the USDA, food prices surged by 25% percent from 2019 to 2023, housing prices went up by over 20% and transportation costs climbed by over 27% during that time. As a result, these expenses have consumed an even larger portion of people's budgets, leaving little room for savings or discretionary spending.

As a result, more people have turned to credit cards as a financial lifeline, but with the Federal Reserve's benchmark rate paused at a 23-year high, the cost of borrowing is also high. The result is a growing number of people trapped under mounting credit card debt — and looking for ways out. While credit card debt forgiveness could help, it's important to understand how much of your credit card debt can be forgiven before taking this path.

Find out more about your credit card debt relief options here.

How much of your credit card debt can be forgiven?

When you pursue credit card debt forgiveness (also known as debt settlement), the goal is to negotiate with the creditors you owe money to in order to settle your debts for less than what's owed. This can be done on your own, but many cardholders opt to use a debt relief company that's skilled in these types of negotiations to increase the odds of success.

When it comes to credit card debt forgiveness, the reality is that there are very few scenarios in which all of your credit card debt will be completely forgiven. Credit card companies are in the business of lending money and collecting on those debts, so they're generally reluctant to write off what you owe.

That said, there are situations where partial forgiveness or debt settlement can occur. In these cases, creditors may agree to accept less than the outstanding amount to consider the debt satisfied. The exact percentage of debt that is forgiven varies widely depending on different factors, including:

• Your financial hardship: Creditors are more likely to negotiate if you can demonstrate genuine financial difficulty.
• The age of the debt: Older debts can often be settled for less, as creditors become more willing to accept partial payment over time.
• The creditor's internal policies: Some credit card companies are more amenable to settlements than others.
• Negotiation skills: Effective negotiation can sometimes lead to more favorable terms, so the amount of debt that's forgiven could depend on you or your debt company's negotiation skills.

On average, successful debt settlements typically result in forgiveness of anywhere from 30% to 50% of the original debt amount. This means that if you owe $10,000 in credit card debt, you might be able to settle for between $5,000 and $7,000. However, it's important to note that these are just averages, and actual results can fall outside this range in either direction.

Learn how the right debt relief company could help you eliminate your credit card debt. 

Will bankruptcy get rid of all my credit card debt?

Filing for bankruptcy is another option for dealing with overwhelming debt. In most cases, filing for Chapter 7 bankruptcy can indeed eliminate all of your credit card debt, as it allows you to discharge most unsecured debts, including credit card balances. It is typically the only way to have your credit card debt fully forgiven. 

However, it's important to understand its implications and limitations:

• Eligibility: Not everyone qualifies for Chapter 7 bankruptcy. You must pass a means test, which compares your income to the median income in your state. If your income is too high, you may be required to file for Chapter 13 bankruptcy instead.
• Asset liquidation: In Chapter 7, non-exempt assets may be sold to pay creditors. While many people can keep most or all of their property through exemptions, it's not guaranteed.
• Exceptions: Certain types of debt, such as recent luxury purchases or cash advances, may not be dischargeable in bankruptcy.
• Long-term consequences: Bankruptcy severely impacts your credit score and remains on your credit report for up to 10 years. This can make it difficult to obtain credit, rent an apartment or even secure certain jobs in the future.
• Limited frequency: You can only file for Chapter 7 bankruptcy once every eight years, so it's not a solution that can be repeatedly used.

If you don't qualify for Chapter 7, your other option is to file for Chapter 13 bankruptcy, which involves a repayment plan over three to five years. While some debt may be discharged at the end, you'll likely have to repay a portion of your credit card debt.

The bottom line

While complete forgiveness of credit card debt is rare, the right debt forgiveness program could help you dramatically reduce the total amount you owe on your credit cards. If credit card debt forgiveness won't provide enough relief, bankruptcy is the only option that could possibly result in all of your credit card debt being forgiven — but even that has its limitations. But while the path to financial recovery may be challenging, it is possible to overcome even significant credit card debt with the right strategy and commitment.