How to Stop Paying Credit Cards Legally: Your Complete Guide to Debt Relief Options [2025]

You do your best to keep up with payments while you juggle rent, utilities, and other day-to-day expenses. You're keeping creditors at bay, but just barely getting by.

Credit card debt is a real struggle for many Americans; collectively, U.S. households owe $1.18 trillion to credit card companies.

Where do you turn for debt relief? Bankruptcy is one option; debt settlement is another. Either one could help you get on the path to a brighter financial future without having to repay your debts in full.

You won't go to jail if you don't pay credit card bills—it’s  not a crime. But you will start a cascade of negative outcomes. It's not a good idea to stop debt payments without a plan and before you know what you’re in for.

Let's look at how to stop paying credit cards legally, what to expect, and how to protect yourself. 

Understanding Your Legal Rights When You Can't Pay Credit Cards

The law offers some protections when you can't pay credit cards because of financial hardship or because your debt has reached an unmanageable level. Most importantly, you can't be arrested or go to jail if you stop paying credit cards. 

What happens when you stop paying credit cards

When a debt goes unpaid, it becomes delinquent. That means you didn't make the required monthly payment on time. 

Credit card companies usually give you a little time to get caught up before your account is marked delinquent. For example, if you're less than 30 days late, the worst that might happen is you're charged a late fee. 

Delinquency becomes more serious once you're 30 days or more late. Here's what a typical delinquency timeline looks like:

• 30 to 59 days late: Your creditor may report your account to the credit bureaus, which typically dings your credit scores. Late fees could continue to pile up.

• 60 to 89 days late: Each new missed payment is reported to the credit bureaus, which means more damage to your credit. Late fees continue to pile up.

• 90 to 119 days late: Your account may be in default, which means you've broken the terms of your credit agreement. The creditor may close your account if they haven't already.

• 120+ days late: Around the 120-day mark, your account may go to collections. Your debt could be transferred or sold to a debt collection agency. Expect to receive calls, phone calls, or texts requesting payment. 

Can you get sued for credit card debt? Absolutely, though that typically doesn't happen unless a creditor or debt collector feels there's no other way to get you to pay. 

It may take six months or more for a debt lawsuit to materialize; the exact timing is up to the debt collector. But even if you're sued for credit card debt, you still have rights. Specifically, you're entitled to respond to the lawsuit and appear in court to put up a defense.

Legal protections under federal law

Under the Fair Debt Collection Practices Act (FDCPA), you have the right to ask a debt collector to validate any debt they contact you about. Debt validation helps you get more information about the debt so you can determine whether it belongs to you. If you don't think the debt is yours, you have the right to dispute it. 

The FDCPA also gives you the right to ask a debt collector to stop contacting you. This could be a risky move. If the creditor believes the debt is legitimate, but they comply with your request to stop contact, the only option is to sue you for the debt. If you want to maintain the ability to communicate with the creditor ahead of any potential lawsuit, it’s not a good idea to ask them to stop contacting you.

The FDCPA also protects you from harassment. Debt collectors cannot:

• Call you before 8 a.m. or after 9 p.m., unless you agree to it

• Contact you at work if you've told them you're not allowed to get calls

• Send emails or text messages if you ask them to stop

• Call you more than seven times with a seven-day period or within seven days after talking with you by phone about a particular debt

• Send you private messages on social media if you ask them to stop

• Threaten you, attempt to intimidate you, lie to you, or use obscene language and/or profanity 

• Tell you that you'll be arrested for debt or threaten to sue you if they don't plan to file a lawsuit. 

If you think a debt collector has violated your rights, you can report them to the Federal Trade Commission (FTC), your state attorney general's office and the Consumer Financial Protection Bureau (CFPB). You may be able to sue a debt collector for any damages caused by their illegal actions.

You have other rights as well. 

• Under the Fair Credit Reporting Act (FCRA), you have the right to dispute credit report errors. Credit bureaus must investigate and correct or remove any errors they find. 

• The Truth In Lending Act (TILA) requires creditors to disclose information about how the cost of credit, which includes fees and interest, is calculated. 

It never hurts to know your rights when it comes to credit and debt, especially if you're worried about getting sued by a credit card company. 

When stopping payments might be strategic

It may be necessary to stop credit card payments if you have a financial hardship situation, or an emergency that drains your cash flow temporarily. You may simply have no room in your budget to keep up with debt payments and still keep a roof over your head and feed your family. 

Financial hardships can happen when you:

• Unexpectedly lose your job or get laid off for an extended period

• Get sick or hurt and can't work temporarily

• Go through a divorce that causes your household income to drop

• Experience the loss of a partner or spouse that also means the loss of their income

An emergency fund can help you get through tough times, but about half of us don't have a three-month rainy day fund saved yet. In these situations, stopping credit card payments probably isn't something you do intentionally. It's just what has to happen for you to stay afloat. 

There are, however, times when you might deliberately decide to stop payments. That might be the case if you plan to seek debt relief through bankruptcy or debt negotiation. Bankruptcy can eliminate your debts in some circumstances. Working with a debt relief company to negotiate your balances could help you get rid of the debt for less than the full amount you owe.

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Legal Ways to Stop Paying Credit Cards in Full

There are right ways and wrong ways to get out of credit card debt without paying. Simply stopping payments and hoping it goes away? That's the wrong way.

If you stop making payments to your creditors and let the accounts default, your credit will suffer serious damage. You'll probably receive collection calls and letters. In a worst-case scenario, you could face a debt lawsuit. If your creditors win the judgment, they could get permission to garnish your wages or seize your bank account to get their money back. 

That's an outcome you can avoid. Consider these tips for how to stop paying credit cards legally. 

Debt settlement: negotiating for less than you owe

Debt settlement, also referred to as debt negotiation, is when you ask your credit card issuers to accept less than the full amount owed on to a delinquent balance. 

Here's how it generally works:

• You review your budget and savings to decide how much you can afford to pay.

• You reach out to the credit card company to make an offer. 

• If the credit card company accepts, you pay the agreed amount in a lump sum or installments.

• Once you've paid, the credit card company forgives the rest of the balance.

Creditors may allow you to settle for anywhere from 20% to 80% of the original balance. The amount you can get forgiven can depend on the original amount owed, how long the debt goes unpaid, and the credit card company's policies. 

Let's say you owe $10,000 to a credit card. Here's how much you might persuade a creditor to accept as time goes on:

• 30 days late: 100% of the balance due

• 60 days late: 80% of the balance due

• 90 days late: 60% of the balance due

• 120 days late: 40% of the balance due

• 180+ days late: 20% of the balance due

This is hypothetical. Credit card companies don't have to agree to reduce your debt at all. They may choose to do so, however, if they view getting something as better than nothing or they don't want to go to the trouble and expense of suing you. Your results will depend on many factors, including the nature of the hardship you’re experiencing.

What if you don't want to negotiate with credit card companies yourself? A debt settlement company can help.

Debt settlement companies employ professional debt experts who negotiate with creditors for you. Here's how Freedom Debt Relief works.

• A debt expert reviews your financial situation to determine if debt settlement is the right fit.

• If it is, you agree to contribute an affordable amount into a dedicated account each month. 

• Once you have enough money in your account to make a reasonable offer, your debt specialist negotiates with your creditors, one at a time, to get them to agree to accept less than what's owed and forgive the rest.

• When an agreement is reached and you approve it, the debt settlement company withdraws money from your dedicated account (with your permission) and uses it to pay your creditor. They also take their fee.

The process is rinse and repeat until all your debts are settled. Debt settlement companies can charge fees for their services, but you may think it's worth it to not have to deal with credit card companies yourself. 

A reputable debt settlement company only gets paid when they successfully negotiate a debt settlement and at least one payment has been made. There are no upfront fees. Enrollment in the program starts with a free debt evaluation, after which you'll get a custom debt relief plan that fits your goals and budget. 

Chapter 7 bankruptcy: complete debt discharge

Chapter 7 bankruptcy can wipe the slate clean on credit cards and other unsecured debts. You could walk away from a Chapter 7 filing without paying anything directly to your credit card debts. 

If you qualify, Chapter 7 could help you eliminate:

• Credit cards

• Collection accounts

• Medical bills

• Personal loans from friends, family, and employers

• Utility bills

• Repossession balances

• Business debts

• Past due rent

• Auto accident claims

• Civil court judgments

• Unpaid taxes and old tax debts

• Government program overpayments

• Attorney's fees

You'll need to pass a means test to qualify for Chapter 7. Means testing looks at your household size and income to determine what you can pay to your debts, if anything.

If your current monthly income is less than the median monthly income for your household in your state, then you automatically qualify for Chapter 7 bankruptcy. If it's higher, you could still qualify if your disposable income, which is the money you have left after deducting certain expenses, is zero or close to zero.

When you file for Chapter 7, the bankruptcy court can take some of the things you own to pay creditors but you're allowed to keep certain possessions. The things you can keep are called bankruptcy exemptions or exempt assets. The federal bankruptcy court has a list of exempt assets; states have them too. 

Some states allow you to choose whether you want to use state or federal exemptions; others require you to use state exemptions. What you can exempt under state law varies by where you live.

Here are some examples of exempt assets in California, Missouri, and North Carolina.

A typical Chapter 7 filing could take four to nine months. That includes the 180-day window before you file a petition in which you're expected to complete credit counseling. Credit counseling is required to make sure you understand the implications of bankruptcy and what filing involves. 

What happens when your Chapter 7 filing is discharged? The court legally releases you from your obligations to your debts. They are behind you forever. You can start rebuilding your financial life. 

You can expect your credit scores to be on the lower side for a while, but they can improve over time. It may be several months or even a year before you can qualify for a traditional credit card again, and you might pay higher interest rates. Chapter 7 bankruptcy stays on your credit reports for 10 years, but the negative impacts usually start to fade after the first 12 to 24 months.

Chapter 13 bankruptcy: structured repayment plans

Chapter 13 bankruptcy allows you to keep your assets and repay your debts over three to five years. It's also called a wage earner's plan, since this type of bankruptcy assumes that you have enough income to pay your debts, but need a little more time to do it. 

You can file for Chapter 13 bankruptcy if you have:

• Unsecured debts less than $526,700

• Secured debts less than $1,580,125

Unsecured debts aren't attached to collateral; credit cards and personal loans are two examples. Secured debts are attached to property or other assets. For example, a mortgage loan is secured by your home. 

Here are the steps in the Chapter 13 process.

• Complete credit counseling through an approved agency.

• File a petition with the nearest bankruptcy court.

• Provide the court with additional documentation, including a list of assets and liabilities, a breakdown of your income and expenses, your most recent year's tax return, and a financial statement. 

• Pay the filing fees and attend the meeting of creditors.

• Submit your repayment plan to the court for approval.

• If approved, make payments to the bankruptcy court according to the terms of your plan, until it's satisfied. 

Discharge is granted only when you fulfill your repayment plan. While you're making payments, you're protected by an automatic stay. This legal protection prevents creditors from suing you for unpaid debts; it also extends to Chapter 7 filers. 

Your plan must pay certain debts in full, but for others, you may be able to pay less than what's owed. Examples of debts that have to be paid in full include child support, alimony, certain back taxes, and mortgage arrears, if you plan to keep your home. But if you complete your plan and still have credit card debt, the balance could be forgiven.

To estimate your monthly payments you would:

• Add up the debts you have to pay in full

• Divide that amount by 60 months 

• Determine if you have enough income to pay this amount, along with your regular monthly expenses

• Determine if you have enough disposable income to pay other debts that don't have to be paid in full

Here's an example of what your payment plan might look like. We'll assume you owe $20,000 in mortgage arrears, $20,000 in arrears to a home equity line of credit, and $20,000 to a car loan for a vehicle you plan to keep. You also owe $10,000 in back child support and $10,000 in back taxes.

The court requires you to pay a 10% administrative fee, which brings your total debt to $88,000. With a 60-month term, your monthly payments work out to  $1,466.67. This is a very generalized example and your actual payments are determined by the type of debt you owe, the amount, your income, and your repayment term. 

How many people fulfill their Chapter 13 repayment plans? The U.S. Bankruptcy Court says about half. In recent years, that number has been as high as 58%. 

Your success (or failure) with Chapter 13 is influenced by your commitment to pay, as well as your ability. A job loss, illness or other major emergency, for example, could easily disrupt your monthly payments. 

So, which is better, Chapter 7 vs. Chapter 13? Or should you consider debt settlement instead? 

Here's how to look at all three.

• Chapter 7 could make more sense if you qualify and mostly owe unsecured debts. 

• Debt settlement could be better than Chapter 13, if you don't qualify for Chapter 7. You don’t have to give up your assets. You can focus on repaying your nonnegotiable debts (like the mortgage on a home you want to keep) while you work on negotiating your unsecured debts like credit cards or medical bills. 

• Chapter 13 could be the best choice if you have significant assets that you want to keep, and you can commit to making all of the required payments under your plan. 

In terms of timing, Chapter 7 could help you get out of debt in just a few months. Debt settlement can take 24 to 48 months on average. Chapter 13 is the longest path, with a 60-month timeline for most people.

Credit card hardship programs

Credit card hardship programs offer relief when a temporary situation keeps you from making your debt payments. Solutions may include:

• Reduced monthly payments

• Temporary pause on certain fees, such as late fees or annual fees

• Lower interest rates

There's typically a time limit on how long you can use these benefits. American Express, for example, offers short-term relief for up to 12 months, but certain hardships may allow you to extend benefits up to 48 months.

Credit card companies can decide what constitutes a hardship. Examples may include a job loss, an illness or injury, a divorce, or death of a spouse. All of these scenarios could lead to a major drop in income, and your creditors understand that you may need time to recover. 

You may be asked for certain documentation to qualify that proves your hardship status. For example, if you've been laid off and denied unemployment benefits, you might need to provide a copy of your denial letter. 

Here's what to know about credit card hardship programs before you enroll:

• A credit card hardship program doesn't let you off the hook for the debt; it just gives you some breathing room while you get back on track. 

• It won't reduce what you owe and you may not be allowed to make new purchases with your card while enrolled. 

• If you miss a payment, your credit card company could cancel your enrollment and reinstate your previous APR, fees, and minimum payment requirements. 

Can a hardship program be a helping hand when you're going through tough times? Absolutely. But a different solution, like debt settlement or other bankruptcy alternatives, could be the better choice if your hardship looks as if it's going to be permanent instead of temporary. 

What to Expect When You Stop Making Credit Card Payments

If you stop paying credit cards you can bet that your creditors will notice. A late fee may be forthcoming, but there are other steps credit card companies can take to get you to pay. 

Here's what to know before and after you stop making credit card payments. 

Before you stop paying: essential preparation steps

A little strategy can go a long way if you plan to stop paying credit cards because of a financial hardship. Here are some of the key steps to include on your preparation checklist.

• Analyze your budget. Go over your budget in detail to see how much you pay to debt now. Compare your expenses to your income to see if there are any costs you could cut that might allow you to continue paying your credit cards. 

• Document your hardship. A paper trail can be a huge help when trying to prove a financial hardship. Make note of when the hardship began and the cause, as well as how it's impacted your income. Round up pay stubs, tax forms, bank statements, unemployment letters, debt statements, and copies of your other bills as proof of your inability to pay. 

• Set aside an emergency stash. An emergency fund could help you get through hard times without having to rely on credit cards. Aim to save $1,000 to start, then consider how you can build that up to several months' worth of expenses. 

• Review state laws. Federal laws protect you against unfair practices by debt collectors, but your state might offer added protection. Check your state laws on debt, including when you can be sued, what steps a creditor must take to sue and what rights you have. 

• Talk to a debt professional. Debt relief experts have seen situations like yours before and they know how to help you find the right path forward. A debt professional can review your budget and debt, then walk you through different solutions to manage your finances. 

What to expect during the non-payment period

Once you stop paying credit cards, that's when the collection calls and letters can start. The Fair Debt Collection Practices Act is there to make sure you're not bombarded all the time. 

Under the FDCPA, debt collectors can't call you:

• More than seven times in seven days about the same debt

• Between 9 p.m. and 8 a.m. without your consent

• Within seven days after they talk to you on the phone about a particular debt 

Debt collectors are also barred from spamming your inbox on social media platforms if you tell them not to contact you there. 

There's no limit on the number of letters debt collectors can send, but they must stop sending them if you send a cease-and-desist request. If you cut contact, a debt collector can't call or write to you again unless it's to tell you that they won't contact you anymore or that they plan to sue you for the debt. 

Can you be sued for credit card debt? Yes, lawsuits can follow when other collection actions fail. In terms of when a creditor or debt collector sues, the timing is up to them. Some may sue right away, while others may try to collect for months before they choose a lawsuit. 

Protecting Yourself Legally When You Stop Paying

Stopping payments to credit cards can result in legal action if a creditor sues. However, state laws can offer some protection for you and your assets. 

Understanding statute of limitations on credit card debt

The statute of limitations on debt spells out how long a creditor has to sue you. When the statute of limitations on a credit card debt expires, it becomes uncollectible. The debt doesn't disappear but you can no longer be sued for it. 

Every state has a statute of limitations for credit cards and other debts. Here's how long creditors can take you to court over credit card debt under each state's law. 

*While this list is accurate at the time of publication, states may change their statutes of limitations. Be sure to check with your state’s attorney general’s office to confirm the current laws on debt collection, or consult with a licensed legal professional.

It's possible to reset the clock on the statute of limitations, which can extend the amount of time a creditor has to sue you. You might restart the clock if you:

• Make a payment

• Promise to pay the debt

• Acknowledge that you owe the debt, either verbally or in writing

• Negotiate an old debt

State law can determine which actions reset the clock. Check your state's laws for guidance, or talk to a legal expert. You may be able to get free or low-cost help from an attorney through your local legal aid service. 

If you know a debt is time-barred, meaning the statute of limitations has run out, you can use that as a defense if you're sued. When you receive a summons for a debt lawsuit, you have an opportunity to file an answer. In your answer to the summons you can claim the statute of limitations as a defense.

You generally don't need to elaborate anything else in the answer, but you'll need to be able to prove to the court that the statute of limitations has expired. If you succeed, you could have the case thrown out. 

Asset protection strategies

What happens if you get sued by a credit card company? It depends on whether they win the case. 

Should a credit card company win a debt lawsuit against you, they receive a judgment. That judgment alone, however, may not be enough to actually collect on what's owed. The credit card company may need to make a separate formal request to:

• Garnish your wages

• Take money from your bank account

• Put a lien on property that you own

North Carolina, South Carolina, Pennsylvania, and Texas are the only states that don't allow wage garnishments for debt judgments. However, a credit card company could still garnish your bank account or put a lien on your property in those states. 

Filing bankruptcy, either Chapter 7 or Chapter 13, triggers the automatic stay, which prevents creditors from enforcing judgments. If you don't plan to file bankruptcy, there may be other ways to protect your bank account from garnishment. 

You could:

• Claim protected direct deposits, such as Social Security benefits or veteran's benefits

• Open an offshore (foreign) bank account

• Consider a private banking trust

The last two may require an attorney's help. If you don't want to go that far, you could try to reach a different agreement with the credit card company. You could try to negotiate a settlement of the amount owed to avoid a garnishment. 

What if you're getting sued for credit card debt and you have joint bank accounts with someone else? State laws determine when a creditor can take pooled money for a debt that only one account holder owes. The person who doesn't owe the debt may be able to protect their share of the money by claiming exemptions for protected funds. 

Responding to credit card lawsuits

What happens when you get sued for credit card debt is partly up to you. You can submit an answer to the summons and defend yourself, or you can do nothing. 

If you do nothing, that could virtually guarantee the credit card company will win, which could open you up to garnishments or liens. So, it's in your best interest to respond to the lawsuit as soon as you receive notice that you're being sued. 

The summons should tell you how to complete your answer, how many copies you need to make, and where you should submit them. You should also be notified of when and where you need to appear in court for the lawsuit. 

You could hire an attorney or represent yourself in court. Hiring an attorney means paying a fee, unless you qualify for low-cost or free help through a legal aid organization. The advantage of having an attorney is that you have a legal expert on your side to present your defense for you. It’s possible to lose a case just by not following the process correctly. 

If you decide to represent yourself, here are a few tips.

• Choose the most appropriate defense in your answer. If more than one applies, make note of that on the response form. 

• Address each claim the creditor makes in the summons.

• Submit the required number of copies to the court and to the creditor (who's listed as the plaintiff in the lawsuit) by the deadline listed on the summons. 

• Gather as much documentation as you can to support your defense.

• Take note of when you're required to appear in court and show up early, dressed in appropriate clothing. 

If the credit card company is willing to talk, you could attempt to negotiate a settlement while a lawsuit is pending. The creditor doesn't have to agree but if they do, that could bring the lawsuit to a halt. 

Alternatives to Stopping Payments

It's not illegal to stop paying credit cards, but maybe you don't want to do that. You could pursue other debt relief solutions instead. Here are some of the options. 

Debt consolidation loans

Debt consolidation is when you combine multiple debts into one using a loan. Consolidation can make debt easier to manage by reducing the number of payments you have to make each month. You use the proceeds from the loan to pay off all your credit cards, leaving you with one payment to make to the loan. 

Types of loans you can use to consolidate debt include:

• Personal loans

• Personal lines of credit

• Home equity loans

• Home equity lines of credit (HELOCs)

The first two are unsecured; the second two are tied to your home. A personal loan could be easier to qualify for, but a home equity loan might yield lower interest rates or higher loan limits. 

Personal loan eligibility is typically based on your credit scores and income. Home equity loans and HELOCs take those into account, but lenders also look at your existing debt and the amount of equity you have. Equity is the difference between what you owe on your home and its market value. 

How do you decide if debt consolidation is the right choice? The simplest way is to look at how much interest you'd pay if you stick with your current repayment strategy, vs. what you could pay with a personal loan or home equity loan. 

For example, say you owe $50,000 in credit card debt with an average APR of 21.37%. You'd pay:

• $1,000/month

• $75,263 in interest, plus the $50,000 you owe

It would take 10 years and six months to pay it off. Now, assume that you get a $50,000 home equity loan at 11.50% with a 10-year term. You'd pay:

• $703/month

• $39,287 in interest, plus the $50,000 you owe

Debt consolidation works best when it eases the financial crisis that you're in and you can comfortably make the payments the new loan would require. If you're completely overwhelmed by the amount of debt you have to repay, then combining it into a single loan may not solve the problem. 

You may lean toward debt settlement instead if you want to get out of debt in two to four years, and pay less than what you owe. Debt settlement could hurt your credit score temporarily but if all your creditors agree to settle, you can avoid bankruptcy. The shorter timeline allows you to rebuild your financial life faster. 

Credit counseling and debt management plans

Credit counseling can offer insight into your finances and debt, and help you decide on a solution. Credit counselors look at your entire financial picture, then give advice on how to deal with your debt. 

A counselor can set up a debt management plan (DMP) for you. Debt management is a structured plan to pay off debt. Here's how it works. 

• You decide which debts to enroll, with the help of your credit counselor. 

• Your creditor counselor negotiates with your creditors to lower your interest rates and possibly waive some fees.

• You make one payment to the credit counselor each month.

• The credit counselor distributes the payment to your enrolled creditors. 

You make all the payments until your debts are gone. Debt management doesn't reduce the total amount you owe, but it could save you money if your creditors agree to cut your interest rate or waive certain fees. And you never stop making payments; you just restructure them. 

The payment amount could be a lot  higher than you’re used to paying, especially if you’ve been making minimum payments on credit card debt. That’s because the plan is designed to clear your debts within three to five years.

Credit counselors typically charge a one-time setup fee to enroll you in a debt management plan, plus a monthly fee. 

By comparison, debt settlement can also have fees, but you typically don't pay anything until your debts are settled. The cost may be higher overall, as far as fees go, but you could walk away with bigger savings if you're negotiating balances down. 

Debt management could be a possibility if you have mostly unsecured debts, like credit cards, and your balance is above a certain threshold. For example, you may need at least $10,000 in credit card debt to qualify. 

The success rate for debt management plans is around 21% by some estimates, which means most people who enroll don't see it through. 

The Debt Settlement Process: Freedom Debt Relief's Approach

Debt settlement is something you can do yourself, but some people prefer to get help from professional debt experts. Freedom Debt Relief works to help you resolve your debt in 24 to 48 months, with a process that's as stress-free as possible. 

Here's more on what makes it unique.

Negotiation strategies and typical outcomes

Freedom Debt Relief works to help you get the best settlement possible. Clients come from all backgrounds, but they have one thing in common: they're ready to move toward a brighter financial future. 

Here are some examples of settlements we've helped clients with.

• Molly was able to settle over $27,000 in debt, with a monthly payment that was less than what she was paying to creditors. 

• Ozzy was empowered to take control of his debt, and was able to settle over $31,000 in just a few years. 

• Patti was able to clear a $17,000 debt burden with help from her Freedom team. 

Sixty percent of our clients see their first debt settled within three months. It typically takes 24 to 48 months to settle all of your enrolled debts, with an average term of 39 months. On average, clients enroll eight accounts for settlement. 

Our clients are overwhelmingly satisfied with their Freedom Debt Relief experience. We have a 4.6/5 rating on Trustpilot, with nearly 45,000 reviews submitted. To date, more than one million people have turned to Freedom for help with their debt. We've settled more than $20 billion in debt across 5+ million accounts. 

Freedom doesn't offer credit repair services, but our debt experts can help you find a reputable credit repair company. Working to repair your credit after debt settlement could help your score to bounce back faster. 

Legal protections for freedom debt relief clients

If you're worried about being sued while you're attempting to settle debts, Freedom has your back. We've partnered with the Legal Partner Network, which is a network of practicing attorneys that specialize in debt negotiation. 

If you're sued while enrolled in the program, Freedom may engage a Legal Partner Network attorney to attempt to negotiate a settlement with your creditor. The attorney won't represent you in court; only in the negotiation process. 

When working with a Legal Partner Network attorney, your responsibilities include:

• Documenting your debts and the progress of the case

• Preserving any evidence that might be relevant to the settlement process

• Responding promptly to your attorney's requests for information

You'll need to attend any court hearings related to the case and file the answer to the summons, along with any paperwork the court requires. Again, those actions are outside the scope of what the attorney will handle. 

You won't pay a separate fee for this service; it's included in the program and is available as long as you're enrolled and make your monthly deposits on time. 

Tax Implications and Financial Consequences

Negotiating a debt settlement could impact your tax filing. Aside from that, your credit could take a temporary hit. Here's what you should know before you attempt to negotiate. 

Tax consequences of forgiven debt

Generally, if you borrow money and part of that debt is forgiven or cancelled, you have to report it on your tax return. That includes credit card debts you settle or negotiate down. 

Your creditor may send you a Form 1099-C that shows how much debt was forgiven and the date the debt was cancelled. You'll need this form to complete your federal income tax return when you file. 

Should you get one of these forms, check it for accuracy. Make sure all of the following is correct:

• Your name

• Your address

• The account number, if included

• The amount of forgiven debt

• The date the debt is forgiven

• Your creditor's name and tax identification number

 If you don't get a Form 1099-C but you have debt that's canceled, the IRS still expects you to report it on your tax return. 

So, do you owe taxes on forgiven debt? Yes, it's treated as taxable income in most cases, with some exceptions. You don't have to include canceled debt in your gross income if you were insolvent when it was canceled. 

Insolvent means you have more debt than assets. Here's how to do the math.

• Add up all of your assets. This is the value of all the things you own. The IRS publishes a worksheet to help you.

• Add up all of your debts.

• Subtract your debts from your assets. 

If you get a negative number, you're insolvent. For example, say you owe $100,000 in debt. You have $5,000 in a savings account and a car that's worth $15,000. If you subtract your $20,000 in assets from your $100,000 in debt, you're $80,000 in the hole. That means the IRS won’t consider the first $80,000 in forgiven debt to be taxable.

Reporting a significant amount of forgiven debt on your return could cause you to owe more in federal taxes for the year. State law determines whether you'll also owe tax on forgiven debt at the state level. Pennsylvania, for example, treats canceled debt as taxable income unless you're insolvent.

Talking to a certified public accountant or another tax professional can give your clarity on how debt cancellation might affect your tax situation. 

Credit score impact and recovery

Creditors can report your account as late to the credit bureaus. If you go long enough without paying, you could end up with a collection account on your credit history. Both can hurt your credit scores and they can stay on your credit reports for up to seven years. 

In terms of how soon you'll see a credit score impact, creditors usually wait until you're 30 days late to report your account as past due to the credit bureaus. It may take several more months for a creditor to decide to turn your account over to collections. 

How do different debt relief programs compare? 

• Debt consolidation. Applying for a debt consolidation loan can trigger a hard inquiry on your credit report. Inquiries count for 10% of your FICO® Score and each one can knock off a few points. You can get them back by paying your loan on time. 

• Debt management. Debt management shouldn't result in late payments on your credit history as long as you make your plan payments on time. However, you could lose some credit score points if you're required to close your accounts while you're enrolled in the plan. 

• Debt settlement. If you're already behind on credit card payments, settling debt doesn't really add to the negative impacts on your credit. Once you settle your debts, you can work on improving your score. 

• Bankruptcy. Bankruptcy is usually seen as a worst-case scenario since it's so damaging to your credit. But for some people, it's truly the best move and you can always work on repairing your credit later. 

Recovering credit score points is not rocket science. You can get lost points back by paying bills on time, keeping your debt balances low, and using different types of credit accounts. It may take you some time to qualify for new loans after debt settlement or bankruptcy, however. 

If you want to get a car loan, for example, it may take one to three years to get in the creditworthy range again. You might be able to get approved for a secured credit card, on the other hand, within the first year. Secured credit cards can help you rebuild credit and the lower limits these cards have can help you avoid racking up a lot of new debt. 

Loans you qualify for in the first few years after debt settlement or bankruptcy may have higher interest rates compared to what you might get after you build a higher score.

Long-term financial planning after stopping payments

If you've stopped credit card payments, either to settle debts or file bankruptcy, look ahead. Ask yourself where you want to be financially once your debt situation is resolved. 

Here are some things you might want to focus on to stay on track. 

• Budgeting. You may have more cash freed up in your budget once you no longer have debt payments to make. Consider how you can make the most of that money, either by saving or investing it. 

• Saving. If you don't have an emergency fund yet, take the baby steps to start building one. Pick a dollar amount that you can realistically save each pay period, add it to your budget, and set up an automatic transfer to a dedicated savings account. It's a simple way to grow your rainy day fund little by little.

• Spending. You may wonder if you should avoid credit cards or loans altogether after debt settlement or bankruptcy. That's unrealistic and it isn't necessary either if you know how to avoid debt problems. Consider how much you spend each month and what you spend your money on. Commit to using cash as much as possible and beefing up your emergency fund so you're not reliant on credit when the unexpected happens. 

• Invest. Investing means putting your money into the market. For example, you might contribute some of the money you used to pay to debt into an individual retirement arrangement (IRA) or taxable brokerage account. You could also invest in yourself by going back to school or learning new skills that could help you land a better-paying job or start a thriving business. 

• Set goals. Financial goals help you stay motivated and they give your hard-earned dollars a purpose. Consider what you'd like to do with your money in the next three months, six months, 12 months, and five years. Then, map out specific action steps and a timeline for each goal on your list. 

Reaching financial well-being after you stop paying credit cards can take time. However, it's well worth it if you come out of your debt situation with a fresh outlook and a renewed confidence in your ability to manage money. 

Making the Right Decision for Your Situation

Should you stop paying credit cards? Or should you consider another way to deal with your debt? Let's wrap things up with some tips to help you decide. 

Self-assessment questions

A self-assessment can help you figure out where you are with your debt and where you'd like to go. Here are some questions to ask yourself to gain clarity on whether it makes sense to stop paying credit cards or choose another path. 

• Do you have enough money to make your credit card payments now, and still have enough to cover your basic living expenses?

• Are you in a financial hardship situation that isn't likely to improve any time soon?

• Is your debt causing a significant amount of stress?

• How soon would you like to become debt free?

• What is your main goal with debt? For example, do you want to get rid of it as quickly as possible, reduce what you owe, or something else?

• Do you have any assets that could be at risk if you're sued for unpaid debt? 

• Is there anyone else who would be affected if you were sued for debt, like a spouse?

• Can you pay something toward your debt? If so, are you willing to commit to those payments for several years?

• How concerned are you about your credit score dropping?

Ultimately, it's your decision whether to stop paying credit cards. Your debt situation may feel urgent but you should still take time to assess which next step is right for you. 

When to seek professional help

Sometimes you need help to handle your debt and that's okay. A debt expert may see solutions that you don't; at the very least, they can offer comfort when you're going through a tough time. 

You might consider seeking out help if you:

• Have fallen behind on debt payments or are in danger of doing so

• Are getting calls from debt collectors

• Have received a summons for a debt lawsuit

If you think bankruptcy is the way to go, you don't need an attorney to file but you may consider hiring one anyway. At the very least, you could look for a bankruptcy attorney locally who offers free consultations so you can discuss whether you might qualify.

If debt settlement sounds like the better fit, do your research. Look for a debt relief company that has a good reputation and is transparent about what it does, and what it charges. Watch out for these red flags:

• Requests for payment before services are rendered

• Requests for payment through unusual methods, like CashApp or Venmo

• Reluctance or refusal to answer your questions

• A poorly designed website, or a complete lack of an online presence

• Lack of transparency about its fees

• Success claims that seem too good to be true

When you sit down to talk to a debt relief company, ask questions. If you don't know what to ask, here's a list.

• What types of debt do you negotiate?

• Are there any debts you can't help with?

• Is there a minimum amount of debt I need to work with you?

• How do you get paid and what are the fees?

• What is your client success rate?

• How many clients have you helped?

• Are you licensed and accredited?

• Are you an attorney, or do you provide attorney assistance if I get sued for a credit card debt? 

Reading online reviews and testimonials can give you a better idea of what a debt relief company's clients have to say about it. 

Freedom Debt Relief stands out as an established leader in the debt resolution space. We have a committed team of experts who work on behalf of our clients, including over 500 certified debt consultants and more than 200 debt negotiators. 

The Freedom Debt Relief Promise ensures that you:

• Have an opportunity to learn about your debt relief options 

• Get a personalized assessment

• Stay informed at every step of the way

Freedom only succeeds when you succeed, so you can feel confident that you're getting the help you need to take control of your debt situation. Connect with a Freedom Debt Relief debt specialist today to schedule a free consultation.