Debt help
Can't pay your credit cards? What to do next
Falling behind on credit cards, or losing the paycheck that paid them, is hard. This guide walks through what happens month by month, the help card companies and nonprofits offer, what to do first after a layoff, and where settlement fits.
What happens when you stop paying a credit card?
There is no single timeline, and each card agreement differs. These are the usual stages, with the rule behind each one where there is a rule. Calling early can change what happens at every stage.
- First missed payment
Fees and higher costs begin
The CFPB lists (CFPB, opens in a new tab) late fees, higher interest rates, higher minimum payments, losing charging privileges and damage to your credit scores.
- About 60 days late
A penalty rate may apply
A card company may raise your rate if it has not received the minimum payment within 60 days of the due date (12 CFR 1026.55(b)(4) (eCFR, opens in a new tab)).
- About 4 to 6 months
The account is charged off
Banks generally charge off (OCC, opens in a new tab) card debt when it is 180 days past due. The FTC notes (FTC, opens in a new tab) you still owe it.
- After charge-off
A collector or debt buyer
The account may go to a collector or be sold. A collector must give you validation information (CFPB, opens in a new tab) about the debt.
- Any time
A lawsuit is possible
A creditor or collector can sue within your state's time limit, which the CFPB says (CFPB, opens in a new tab) is usually three to six years.
Late payments and collections can generally stay on your credit report for up to seven years.
What is a credit card hardship program?
It is a change to your payments that a card company agrees to because of a job loss, an illness or another emergency. The CFPB says (CFPB, opens in a new tab) many card companies are willing to work with you in a financial emergency, and the FTC suggests (FTC, opens in a new tab) calling before a debt collector is involved.
Programs differ by company, so ask directly for a hardship or payment assistance program, and ask these questions before you agree.
- What changes: the payment, the interest rate, the fees, or all three?
- For how long, and what happens when the program ends?
- Will the card be closed or frozen while you are in it?
- How will the account be reported to the credit bureaus?
- Can you have the terms in writing before your next payment?
What should you do first if you were laid off?
File for unemployment benefits as soon as you can. Each state runs its own program with its own rules and weekly amounts, and CareerOneStop (CareerOneStop (sponsored by the U.S. Department of Labor), opens in a new tab), sponsored by the U.S. Department of Labor, links every state's claim site.
Then call your card companies and say plainly that you lost your job. The CFPB suggests (CFPB, opens in a new tab) explaining why you cannot pay, how much you can pay, and when you expect to restart normal payments.
- Make a budget (FTC, opens in a new tab) from your bills and your new income, and keep housing, utilities, food and transportation paid first.
- Keep your layoff notice, your unemployment claim and notes of every call to a card company in one place.
- Some states protect unemployment benefits from creditors. Florida, for one, lists them on its garnishment exemption form (Florida Legislature, opens in a new tab).
- Be wary of any debt relief offer that wants a fee first: a debt settlement company is not allowed (CFPB, opens in a new tab) to collect fees before it settles a debt.
If you expect new income within a few months, a short hardship plan may be all you need. Longer programs make more sense once you know what you will earn.
Does a charge-off mean you no longer owe the debt?
No. A charge-off is an accounting step: the bank writes the balance off its books as a loss, usually around 180 days past due (OCC, opens in a new tab). The FTC is clear (FTC, opens in a new tab) that you still owe the debt, and it can hurt your credit further.
After a charge-off the bank may keep collecting itself, hire a collector, or sell the account to a debt buyer. Whoever holds it can keep trying to collect, and can sue within your state's time limit.
The credit report clock does not restart when a debt is sold. Under 15 U.S.C. 1681c (Cornell LII, opens in a new tab), a charged-off or collection account can generally be reported for seven years, counted from 180 days after the delinquency that led to it.
What are your options if you still cannot pay?
Each option trades something. This table is a starting point; a nonprofit counselor or a lawyer can tell you which fits your numbers, and our comparison guides go deeper.
| Option | What it does | Watch out for |
|---|---|---|
| Hardship plan with the card company | Changes your payment for a time | Terms vary; the card may be closed |
| Nonprofit credit counseling and a debt management plan | Lowers the monthly payment, sometimes the rate, rather than the balance (CFPB, opens in a new tab) | Ask about fees first; you repay the full balance |
| Debt settlement | Creditors agree to accept less than the balance | Credit damage, possible lawsuits (CFPB, opens in a new tab), fees, taxes on forgiven debt |
| Bankruptcy | A court process that can discharge (U.S. Courts, opens in a new tab) many unsecured debts | Court and lawyer costs; can stay on your credit report for up to ten years (CFPB, opens in a new tab) |
Where does settlement fit, and where does it not?
Settlement asks creditors to accept less than you owe, usually after you have saved toward a lump sum. It has real costs.
The FTC warns (FTC, opens in a new tab) that if creditors do not agree, you could end up owing more in late fees and interest, and the CFPB warns (CFPB, opens in a new tab) about companies that tell you to stop paying your cards.
Settlement may fit
Several cards you cannot catch up on
Balances you cannot repay in full, and income steady enough to set money aside each month.
Settlement may not fit yet
Your income just stopped
Without income you cannot save toward settlements. Start with unemployment, a hardship plan and a nonprofit counselor.
Settlement may not fit
You cannot pay anything soon
If there is no money to set aside, bankruptcy may protect you better. Talk to a bankruptcy attorney.
Settlement may not fit
A card is already in court
Respond to the lawsuit and talk to a lawyer. A settlement program does not stop a lawsuit already filed1.
If you have $10,000 or more of unsecured debt and some steady income, we can talk through whether settlement fits. Most programs run 24 to 48 months, and we will tell you plainly if another option fits you better1.
What if a card company or collector sues you?
Respond by the date in the court papers, yourself or through a lawyer. The CFPB says (CFPB, opens in a new tab) responding does not mean you agree you owe the debt, and that if you do not respond the court can enter a default judgment, which can lead to garnished wages or a frozen bank account.
Talking about a settlement does not pause your court deadline. Legal aid, a lawyer referral service or the court's self-help center can explain how to respond (below).
Where to get legal help
Free and low-cost legal help.
We are not a law firm and cannot give legal advice. These are the people who can, many of them free. None of them pays us, and we do not pay them.
-
Bar referral
A lawyer referral service near you
Bar-run lawyer referral services match you with a local lawyer for your kind of case. The American Bar Association lists them by state and city.
Find a referral service (ABA) (opens in a new tab) -
Court self-help
Legal help and court forms for your state
LawHelp.org offers free legal information, court forms, self-help tools and referrals to nonprofit legal aid in every state.
Open LawHelp.org (opens in a new tab) -
Legal aid
Free legal aid near you
Legal aid offices give free civil legal help, including with debt lawsuits, to people who qualify. The Legal Services Corporation finder lists the office for your area.
Find legal aid (LSC) (opens in a new tab) -
A lawyer
How to find a consumer lawyer
The CFPB explains where to look for a lawyer who handles debt collection cases, and what experience to look for.
Read the CFPB guide (opens in a new tab)
Things you should know
The downsides, stated plainly.
Read these before you enroll anywhere, including with us. They apply to every debt settlement program.
- Your credit score will drop during the program, and late payments stay on your credit report.
- Creditors may keep collecting while you save, and they can sue. The program does not stop legal action.
- Interest and late fees can keep adding to your balances until each account settles.
- Forgiven debt may be taxable income. A creditor may send you IRS Form 1099-C.
- Fees apply. The fee is a percentage of your enrolled debt, set individually, and charged only after a settlement is reached.
- Not all creditors agree to settle, and not everyone completes the program.
- We do not guarantee any amount, percentage or timeline.
- Debt settlement is not available in all states. We are not a nonprofit or a credit counseling service, and we do not lend money.
- We do not give legal or tax advice. Talk to an attorney or a tax professional about your situation.
Notes on the figures and claims above
- 1A debt settlement program does not stop legal action; creditors may keep collecting and can sue. Your credit score will drop, whether an account settles depends on the creditor, and not all debts settle. Forgiven debt may be taxable. Fees apply to accounts settled through our program.
What happens if I stop paying my credit cards?
Late fees and a possible penalty rate come first, then damage to your credit. Around six months in, the bank usually charges the account off and may sell it to a collector. You still owe it, and you can be sued.
Should I tell my card company I lost my job?
Yes. The CFPB suggests explaining why you cannot pay, how much you can pay, and when you expect to restart normal payments. Many card companies will change your payment in an emergency.
How long does a charged-off card stay on my credit report?
Generally up to seven years, counted from 180 days after the delinquency that led to the charge-off. Selling the debt to a collector does not restart that clock.
Can a credit card company sue me?
Yes, within your state's time limit, usually three to six years. If you are sued, respond by the date in the court papers and contact legal aid or a lawyer.
Is debt settlement a good idea right after a layoff?
Usually not right away. Settlement needs steady monthly deposits. If your income has stopped, start with unemployment benefits, a hardship plan and a nonprofit counselor, and look again once income returns.
Sources
Where the facts on this page come from. Each link opens the original in a new tab.
- 01 CFPB What should I do if I can’t pay my credit card bills? (opens in a new tab)
- 02 CFPB Act fast if you can’t pay your credit cards (handout) (opens in a new tab)
- 03 eCFR 12 CFR 1026.55: Limitations on increasing rates, fees and charges (the 60-day delinquency exception) (opens in a new tab)
- 04 OCC Bulletin 2000-20: Uniform Retail Credit Classification and Account Management Policy (charge-off timing) (opens in a new tab)
- 05 FTC How To Get Out of Debt (opens in a new tab)
- 06 Cornell LII 15 U.S. Code 1681c: Requirements relating to information in consumer reports (10 and 7 year limits) (opens in a new tab)
- 07 CFPB How long does information stay on my credit report? (opens in a new tab)
- 08 CFPB Can debt collectors collect a debt that’s several years old? (opens in a new tab)
- 09 CFPB What information does a debt collector have to give me about a debt? (opens in a new tab)
- 10 CFPB What is the difference between credit counseling and debt settlement, debt consolidation, or credit repair? (opens in a new tab)
- 11 CFPB What is a debt relief program and how do I know if I should use one? (opens in a new tab)
- 12 U.S. Courts Chapter 7: Bankruptcy Basics (opens in a new tab)
- 13 CareerOneStop (sponsored by the U.S. Department of Labor) Find unemployment benefits in your state (opens in a new tab)
- 14 Florida Legislature Fla. Stat. 77.041: notice to defendant and claim of exemption from garnishment (file within 20 days) (opens in a new tab)
- 15 CFPB What should I do if I’m sued by a debt collector or creditor? (opens in a new tab)
- 16 NFCC National Foundation for Credit Counseling (opens in a new tab)
Next step
Ready to see your numbers?
Check your state and see an illustrative estimate across your cards, with the fee as its own line. Nothing is signed until you say yes.
Four short steps
Your estimate first. Contact details last.
- 1How much you owea close guess is fine
- 2What kinds of debtpick all that apply
- 3Which state you live inchecked before anything else
- 4Your estimate, then a real person if you want one