Hardship Assistance Credit Card Debt Guide: How Card Hardship Programs Work

Hardship assistance credit card debt options compared

Each path fits a different situation. Most people should try them roughly in this order.

None of these are government programs, and there is no federal grant that pays off credit cards. Anyone who says otherwise is likely selling something.

How issuer hardship programs work

A hardship program is an agreement between you and your card company to change your payment terms for a while because of a real setback. Issuers would usually rather collect something than send an account to collections, so many have internal programs for customers who ask.

Common features include:

• A lower interest rate for a set number of months.
• Waived late fees or over-limit fees.
• A reduced or fixed monthly payment.
• A short pause in payments, though interest may keep adding up.
• A long-term payoff plan for accounts that are already seriously late.

Every issuer sets its own rules, and terms are not published in one place. Expect to be asked about your income, your expenses, and what caused the hardship. Some issuers ask for proof, like a layoff letter or medical bills.

What to say when you call your card company

A short, honest script works best. Have your budget in front of you so you know what you can truly afford.

1. Explain the change: "I lost my job in September," or "I had surgery and was out of work."
2. Ask the direct question: "Do you have a hardship program or payment assistance plan?"
3. Name a number: "I can pay $60 a month right now."
4. Ask about interest and fees: "Can the interest rate be lowered and late fees waived during the plan?"
5. Ask about reporting: "How will this show on my credit report?"
6. Write it down: note the date, the person's name, and what was agreed.

If the first person says no, ask politely whether there is a hardship or recovery department you can be transferred to. Calling before you fall behind usually gives you more choices.

Effects on your credit and your card

A hardship plan is usually gentler on your credit than missed payments. Still, there are effects to expect:

• The issuer may freeze or close the card while you are in the plan. A closed card can raise your credit utilization and may lower your score.
• The issuer may add a note to your credit report showing a modified payment arrangement.
• Payments you make on time under the plan help keep the account from going further past due.

You can check what is being reported for free at AnnualCreditReport.com. If something is wrong, dispute it with the credit bureau.

Nonprofit debt management plans

If you owe several cards, or your issuer's hardship offer is not enough, a nonprofit credit counselor can help. A counselor reviews your whole budget for free or a small fee and explains your options. You can find an agency through the National Foundation for Credit Counseling.

If a debt management plan fits, you make one monthly deposit to the agency, which pays each card. Card companies often agree to lower rates or waive fees for people on these plans. The FTC says plans can take 48 months or more, and you may need to avoid new credit while you are in one. You still repay the full balance, but at a more manageable cost. Our guide to debt management plans covers the pros and cons, and our credit card payoff calculator shows how a lower rate changes your payoff date.

The risks of debt settlement

Debt settlement means paying a card company less than the full balance to close the account. You can negotiate yourself, or pay a for-profit company to do it. According to the FTC, these programs usually ask you to stop paying your cards and save money in a special account until a settlement is reached.

The risks are real:

• Late fees and interest keep growing while you save.
• Your credit score can drop sharply from missed payments.
• Creditors can sue you, which can lead to wage garnishment or a bank levy.
• Not every card company agrees to settle.
• Many people do not finish the program, and still owe fees and debt.
• The forgiven amount may be taxable income.

If you do use a company, know that under federal rules it cannot charge fees until it has settled at least one of your debts, and the money in your account belongs to you. Our page on debt settlement programs explains more.

Is forgiven credit card debt taxable?

Often, yes. When a card company forgives or settles a debt for less than you owe, the IRS generally treats the canceled amount as income. A creditor that cancels $600 or more files Form 1099-C and sends you a copy.

There are exceptions, explained in IRS Topic 431:

IRS Publication 4681 includes a worksheet to figure insolvency. Free tax help is available through IRS volunteer programs in many areas.

If your account is already in collections

If your card was charged off or sold to a debt collector, you can still ask for a payment plan or settlement, but you will deal with the collector instead of the issuer. You have rights under federal law, including the right to ask the collector to verify the debt. The CFPB debt collection guide has sample letters.

• Do not ignore court papers. Respond by the deadline, or you may lose by default.
• Get any settlement offer in writing before you pay.
• Ask legal aid for help if you are sued.

Protections for servicemembers

Active-duty servicemembers have extra protections. Under the Servicemembers Civil Relief Act, interest on debts taken out before active duty can be capped at 6% during service. Contact your card issuer and send a copy of your orders. Military financial counselors on base can also help at no cost.

Warning signs of a debt relief scam

People who are behind on cards get a lot of offers. Be careful with any company that:

• Charges a fee before settling any debt.
• Promises to erase your debt or stop all lawsuits.
• Claims to run a "government" credit card relief program.
• Tells you to stop talking to your card company without explaining the risks.
• Signs you up without reviewing your finances.

Report scams at ReportFraud.ftc.gov and to your state attorney general. See our list of common debt relief scams.

Your plan, step by step

1. Write a simple budget showing income, needs, and what is left for debt.
2. List each card with the balance, rate, minimum payment, and due date.
3. Call each issuer and ask for a hardship program, using the script above.
4. Get every agreement in writing and set up the payment so it is never late.
5. Book a free or low-cost session with a nonprofit credit counselor if the offers are not enough.
6. Look for other help that frees up cash, like SNAP, energy assistance, and unclaimed money.
7. Talk to legal aid if you are sued or thinking about bankruptcy.

Freeing up money elsewhere often matters as much as the card plan. Our guide to credit card debt relief covers more ways to cut costs.

Related guides

• Debt relief hardship programs
• Debt consolidation for credit cards
• Debt relief for medical bills
• How to find unclaimed money

Frequently asked questions

This guide is general information, not legal, tax, or financial advice. National Relief Program is an independent website, not a government agency, lender, or card issuer. Hardship terms vary by issuer, so confirm details directly with your card company.