Here's who could qualify for credit card debt forgiveness this August

Debt forgiveness could help you wipe out your debts faster than expected, but you'll have to qualify first. Getty Images

Credit card balances are hitting record highs across the nation, and many Americans are finding themselves drowning in monthly payments that seem to grow larger despite their best efforts. Part of the issue is that sticky (and rising) inflation is still impacting household budgets, as are the high rates that come with most borrowing tools right now. As a result, this is a particularly challenging time for borrowers, especially those carrying substantial credit card debt, as the rates tied to credit cards are typically higher than most other options. 

If you're among the millions of Americans struggling with credit card debt now, you might be wondering if there's a way out that doesn't involve years of minimum payments or the nuclear option of bankruptcy. The short answer is yes, thanks to credit card debt forgiveness, which is a middle-ground solution that can potentially reduce what you owe by significant amounts, sometimes by 30% to 50% of the original balance. But here's the thing: Not everyone qualifies to enroll in a credit card debt forgiveness program.

Credit card companies and debt collection agencies aren't just handing out reduced payment agreements to anyone who asks, after all. They typically only consider offers when specific conditions are met, and understanding these criteria could mean the difference between continuing to struggle with unmanageable payments and finding a realistic path forward, starting this August.

Find out what your debt relief options are and get started today.

Here's who could qualify for credit card debt forgiveness this August

The following borrowers are most likely to qualify for credit card debt forgiveness this August:

Borrowers who are facing genuine financial hardship

The most successful debt forgiveness candidates are those experiencing legitimate financial hardships that make full repayment unrealistic. This includes people who have lost their jobs, had their hours significantly reduced or are dealing with major medical expenses that have derailed their finances. That's because credit card companies are generally more willing to negotiate when they can see clear evidence that a borrower's financial situation has fundamentally changed.

Creditors would rather recover something than risk getting nothing if you file for bankruptcy. So, if you've experienced a divorce, disability or another life-changing event that has impacted your ability to pay, you're likely a strong candidate for debt forgiveness right now. The key, though, is being able to document your hardship and demonstrate that your current income simply cannot support your existing payment obligations. 

Learn more about how debt forgiveness could help you get out of debt now.

Borrowers with significant amounts of unsecured debt

Borrowers who are carrying substantial amounts of unsecured debt — typically $7,500 to $10,000 or more across multiple credit cards — often find themselves in the sweet spot for credit card debt forgiveness. When you have large credit card balances spread across several credit cards, the math starts working in favor of settling for less than what's owed because creditors realize that pursuing full collection becomes increasingly unlikely.

The more debt you have relative to your income, the stronger your position becomes in negotiations. If your total unsecured debt exceeds 40% to 50% of your annual income, for example, you're entering territory where creditors may view forgiving part of your debt as their best option for recovery. This is especially true if you can demonstrate that continuing to make the minimum payments would take decades to pay off the full balances.

Borrowers who have stopped making payments (or are close to it)

While it may seem surprising, borrowers who have already fallen behind on their monthly payments or are on the verge of default often have the most leverage in settlement negotiations. Once you've missed several payments, creditors begin to view your account as a loss and may be willing to accept a significantly lower lump-sum payment rather than write off the debt entirely.

That means if you're currently making minimum payments but barely surviving financially, you might be in a weaker negotiating position than someone who has already acknowledged they cannot continue paying. Creditors are more motivated to forgive a portion of the debt for borrowers who have demonstrated that they're unable to continue paying rather than those who are still managing to make payments, even if those payments are causing financial strain.

What to do if you don't qualify for debt forgiveness

If you don't fit into one of these categories, don't lose hope. There are other debt relief options worth exploring, especially if you do so before your situation becomes dire. For example, credit counseling services can help you create a debt management plan with a realistic budget and, in many cases, lower interest rates and fees compared to what you're currently paying.

Debt consolidation is another option to consider, especially if your credit score is still high and you remain current on your payments. Taking this route allows you to combine multiple high-rate credit card balances into a single, more manageable payment with a lower interest rate. 

Balance transfer credit cards with promotional 0% APR periods can also provide temporary relief and a chance to pay down principal without accumulating additional interest. As with debt consolidation, though, you'll typically need a high credit score and steady income to qualify for the best offers.

The bottom line

Credit card debt settlement isn't a solution for every type of borrower, but for the right ones, it can be a powerful tool for digging out of overwhelming debt. So, if you've fallen seriously behind on payments, are dealing with major financial hardship, or are trying to avoid bankruptcy, this August could be the time to take action. Just be sure to do your homework, vet your debt relief company options carefully and consider the alternatives available to you before moving forward. Making the right choice now can save you from a much bigger burden later.

Angelica Leicht

Angelica Leicht is the senior editor for the Managing Your Money section for CBSNews.com, where she writes and edits articles on a range of personal finance topics. Angelica previously held editing roles at The Simple Dollar, Interest, HousingWire and other financial publications.