How to Stop Paying Credit Cards Legally

Anyone who’s been in deep credit card debt knows that paying it off can be a long and stressful process, so it’s natural to wish for a quick fix. But paying off your debt is even harder in today’s environment, where credit card balances and interest rates are both at all-time highs.

The good news is there are legal ways to reduce and even eliminate your credit card debt – including debt management plans, bankruptcy, and in some cases, debt settlement. Whichever approach you choose, know that there are also drawbacks, ranging from legal fees to credit score damage.

What Happens If You Don’t Pay Your Credit Cards?

If you stop paying your credit cards without having an alternative plan in place, the consequences can quickly escalate. Ignoring the debt won’t make it go away. In fact, it will likely make your financial situation worse. Here’s what typically happens when you stop making payments:

• Day 1: You begin accruing late fees and interest charges. You also lose access to your credit card rewards and may forfeit any you’ve already earned.
• 30 to 179 days late: Every 30-day period of missed payments results in a negative mark on your credit report, which stays there for seven years. Your minimum payment may increase, and a penalty interest rate—often much higher than your original rate—can be applied.
• At 180 days late: Your account will likely be charged off and sold to a debt collector. This causes further damage to your credit score and can make future borrowing more difficult.
• While in collections: The debt collector may continue adding interest to your balance and could file a lawsuit to collect the debt, depending on your state’s laws.

Stopping payments without a plan can lead to long-term financial harm. Fortunately, there are ways to get out of credit card debt without paying the full amount. Options such as debt settlement, nonprofit credit counseling, or bankruptcy can help reduce what you owe or offer a structured path to becoming debt-free.

How to Erase Credit Card Debt Without Paying

Many people want to know how to get out of credit card debt without paying it all off and without getting into legal trouble.

First off, you should know that it’s not illegal to stop paying your credit cards. You can’t be sent to jail and debt collectors are not allowed to threaten you in order to get money. They can, however, choose to sue you in certain circumstances. Here are some ways you can get your debt reduced or dismissed without bringing on any legal trouble.

Here are a few to consider:

Debt Settlement

Debt settlement is a process that involves negotiating with creditors to pay less than the full amount you owe. This solution is worth considering when your debt is already in collections and you need to resolve the collection accounts for a specific reason, like to avoid an impending lawsuit or to get approved for a mortgage.

There are several safe ways to go about settling debt, but hiring a for-profit debt settlement company might not be one of them. When you hire these companies, you put yourself at greater risk of being sued by debt collectors and, on top of that, you’ll pay major fees for their services, which do severe damage to your credit scores.

If you do want to settle debt safely, consider negotiating directly with your creditors or debt collectors yourself, or working with a credit counseling agency that offers nonprofit debt settlement services.

Debt Management Plan (DMP)

A debt management plan (DMP) is a special payment plan you can enroll in through a nonprofit credit counseling agency. Going on a DMP does not forgive your credit card debt, but it can help you in a number of other ways:

• Consolidates your credit cards into one monthly payment
• May reduce your monthly credit card payment
• May reduce your interest rates to around 8% and forgive late fees

Like other options, DMPs have their drawbacks. For example, you may have to close all of your credit cards, which means your credit scores will initially drop. But in the long term, you can see tremendous benefits to your credit scores as you pay off debt and implement the money management strategies you receive from your credit counselor.

Bankruptcy

If you can’t afford to pay back all of your credit card debt within the next five years, it’s time to carefully consider filing for bankruptcy. Bankruptcy is a legal process that can result in having some or all of your debt forgiven, but it’s not a quick or painless solution for credit card debt.

Bankruptcy attorney fees can cost anywhere from $1,250 to $3,000 on average and filing bankruptcy damages your credit scores more than any other debt-related activity.

If you do wish to file bankruptcy, you typically have one of two options:

• Chapter 7 bankruptcy: With Chapter 7, the court appoints a trustee to sell your non-essential assets and distribute the proceeds to your creditors. Your remaining debt is then discharged or canceled.
• Chapter 13 bankruptcy: If you’re earning income, you can go on an affordable, 3-5 year repayment plan under Chapter 13, and then have your remaining debt discharged after the payment plan ends.

Comparing Credit Card Debt Forgiveness Options

When deciding how to manage or eliminate credit card debt, it’s important to compare the benefits, risks, and costs of the options for debt relief. The table below will help you break down your choices and determine which solution best fits your financial goals and priorities. Pay close attention to “fees” and “credit score damage”, as this is where the major differences lie.

Alternative Options for Eliminating Credit Card Debt

If you don’t want to take on the fees and credit damage involved with bankruptcy and debt settlement, look for other ways to make your debt manageable. Any or all of the following strategies could help:

• Contact your creditor: Advise your creditor that you’re having a financial hardship and ask if they can pause or reduce your payments. They may also allow you to move your payment due date to a later date in the month.
• Consolidate: Use a low-interest loan or a 0% introductory APR credit card to pay off your debt, but only if it helps you get into a more affordable payment arrangement, with all fees considered.
• Debt avalanche: Use the debt avalanche strategy to reduce your interest charges and pay down debt faster. With this strategy, you use all of your spare cash to pay off the credit card with the highest APR first. Once it’s paid off, you move your extra cash to the card with the next-highest APR.
• Credit counseling: Talk to a certified credit counselor to get professional insights on all of your debt management options. A counselor can also review your budget and help you find ways to cut costs and pay off debt more aggressively.
• Military aid: For servicemembers and veterans, see if you’re eligible for grants, loans or other help from the VA or your military aid society.

Preparing Financially and Mentally

According to a Gallup poll, 25% of Americans are worried about covering the minimum payments on their credit cards. While it’s easy to pinpoint how much credit card debt you have, it can be impossible to measure the emotional toll worrying about debt takes on you.

When you’re in a stressed state-of-mind, it’s difficult to make thoughtful decisions about money. You might find yourself spending impulsively, slipping into denial about your debt, or looking for a quick fix, regardless of the consequences. Instead of giving in to the stress, keep these tips in mind:

• Schedule time to review your options and carefully weigh the pros and cons of each one, without distractions.
• Remember the quick solution isn’t usually the best. There may be big fees and other consequences down the line.
• Get help from a professional credit counselor if you feel overwhelmed or confused by what’s available, or if you need help communicating with your creditors.

What to Do If You Can’t Pay Your Credit Card Bills

There are a handful of different ways you can eliminate credit card debt without getting into legal trouble. But some of them involve major fees and credit damage. Before you make a decision, compare your options, making sure to consider all of the up-front and ongoing costs involved. And remember, if you do decide to go use an option like a DMP or filing bankruptcy, your debt will eventually be eliminated but the damage to your credit scores won’t last forever.