Key takeaways

  • You may be able to get out of debt without paying based on factors like your total debt, type of debt and income.
  • Several programs are available to help forgive student loan debt, such as income-driven repayment plans, Public Service Loan Forgiveness, and Perkins Loan Cancellation.
  • You may also have student loan debt forgiven if you file bankruptcy, have a permanent disability or die.
  • Alternatives to bankruptcy include supplementary income, a debt management plan, a debt consolidation loan or asking friends and family for help.

Debt happens. At Bankrate, one of the questions we are frequently asked is, “When I can’t pay my debts, what options do I have?” We know that it can be challenging to get out of debt, especially if your outstanding balances are steep. However, there are ways to eliminate those pesky balances without paying off the debt. Teacher Loan Forgiveness programs and Public Service Loan Forgiveness could be an option if you have student loans. If you want to know how to stop paying credit cards legally, that could be tackled with debt settlement programs or filing for bankruptcy.

Some of these options can help you get much-needed temporary financial relief. Still, there are drawbacks to consider, including the risk of being sued or selling assets. So, it’s vital to understand how they work and weigh the benefits and drawbacks of each. You may find that repaying what you owe is the best choice to preserve your financial health.

How to get out of debt without paying

Debt might feel homogeneous, but each type is different. Your options will depend on which type you’ve accrued. Before you stop paying, make sure you know the limitations and the long-term ramifications of doing so.

How to get out of student loan debt without paying

There are a few options for getting out of student loan payments. Your loan, job status and sometimes even the school you attended will play a role in determining your eligibility for these programs:

  • Income-driven repayment plans: These types of repayment plans reduce your monthly payments to 10 to 20 percent of your income for the next 20 or 25 years (depending on the plan). After that, the remaining loan balance is forgiven. “Going this route can help you eventually get free of your debt, but it will take a long time to get there,” says debt attorney Leslie Tayne, founder of Tayne Law Group. “Plus, you may have to pay taxes on the forgiven amount. However, the tax implications are currently paused until 2025 due to the pandemic.”
  • Public Service Loan Forgiveness: This program is available for those who work in the public sector, such as government employees and those who work for a nonprofit organization. After you’ve made 120 qualifying payments while working full time for a qualifying employer, the rest of your direct loans will be forgiven. “While pursuing Public Student Loan Forgiveness takes less time than following an income-driven repayment plan, your employment options will be limited,” says Tayne. “The good news? Any forgiven balance will not be considered taxable income.”
  • Teacher Loan Forgiveness: Open to teachers who work five consecutive years at a low-income elementary or secondary school and to those who work at an educational service agency, you might qualify for forgiveness of up to $17,500 of your Direct Loans or Stafford Loans.
  • Perkins Loan Cancellation: Teachers, firefighters, law enforcement officers and others are eligible for Perkins Loan cancellation or discharge. Cancellation can happen over the course of five years, while discharge could happen in the event of bankruptcy, death or disability.
  • Closed school discharge: If your school closed while you were attending (or soon after you withdrew), you may qualify to have your federal student loans discharged.
  • Discharge options: You could get your loans discharged in the event of death, permanent disability or — very rarely — bankruptcy.

You can’t have a defaulted loan forgiven, but defaulted loans may qualify for discharge, depending on the loan and the program.

How to get out of credit card debt without paying

Bankrate insights

If you have more credit card debt than you can handle, you have some options:

  • Stop paying your credit card bill: If you opt for this approach, the debt is turned over to a collection agency, and your credit score will decline dramatically. But there’s a statute of limitations for how long creditors can sue you for outstanding credit card debt, which varies from three to 10 years in most states. You could skip payments, but you might be liable for them later. “Technically, you can stop paying your credit card bills, but it isn’t advisable,” said Tayne. “It will make it difficult for you to borrow money for years to come. Plus, you’ll get hounded by your creditors and collection agencies and could even get sued.”
  • Debt settlement: Another route is debt settlement, which involves settling your debt with the current lender (or collection agency, if it’s reached that point) for less than what you owe. “Debt settlement is an agreement that you would make with your creditor where the creditor agrees to accept less than the amount owed to satisfy the debt. Amounts generally fall in the range of 50 to 80 percent of the balance,” said Katie Bossler, of GreenPath Financial Wellness. “You can negotiate your own settlement or hire a lawyer to negotiate on your behalf.”

Falling behind on your credit card payments or settling your balances on your own or through a debt settlement company will have serious consequences for your credit health. Your creditors can also sue you if you fail to pay the collection agency or your creditors don’t agree to the terms of the settlement offer.

How to get out of debt through bankruptcy

Bankruptcy should only be considered if you don’t have any other options. Filing for bankruptcy may sound like you’re starting over, but depending on the type of bankruptcy you pursue, you may still be on the hook for some of your outstanding debt:

  • Chapter 7: In a Chapter 7 bankruptcy filing, some of your assets are sold to pay back debt, meaning you could lose your home and personal property. A few months after filing, your remaining debt will be discharged — although Chapter 7 typically won’t cover things like student loan debt or child support.
  • Chapter 13: In a Chapter 13 filing, you get set up on a court-ordered repayment plan. Any remaining debt after a certain time, like five years, might be discharged. This process means you’ll spend even longer paying off your debt and have a bankruptcy filing on your credit report.

Depending on the type of bankruptcy you file, a bankruptcy filing could stay on your credit report for up to 10 years, which is why it’s important to carefully weigh your options and your outstanding debt. Debt collectors can’t attempt to collect a debt discharged in bankruptcy, and they can’t continue collection activity while the bankruptcy case is pending — but the filing itself will have long-term effects on your financial health.

Bankrate insights
You may still owe a portion of your debt balances after filing bankruptcy. Furthermore, its negative impact on your credit health could hurt you financially for years to come.

Why not paying debt is not a good solution

Walking away from debt without paying it off can have a variety of negative and long-lasting ramifications. Some of these include:

  • Poor credit
  • Difficulty borrowing money in the future
  • Harassment from creditors and collection agencies
  • Lawsuits
  • Increased cost for borrowing money in the future

Your credit report is a vital part of your financial well-being. Defaults, collections and bankruptcies crush your credit score, which can impact your future in many ways.

“You may no longer be able to get favorable interest rates or favorable insurance premiums,” said Bossler. “It could affect employment, housing and more.”

Avoiding payment also means that creditors can sue you for unpaid bills. In some states, you could get your wages garnished or have your assets seized. You’re still paying your outstanding debt even if you aren’t making the payments directly.

Alternatives to bankruptcy

If you have the chance to avoid bankruptcy, you should take it. Here are some alternatives to consider:

  • Ask for assistance: Contact your lenders and creditors and ask about lowering your monthly payment, interest rate or both. You might qualify for temporary relief with forbearance or deferment for student loans. See what your lender or credit card issuer offers for hardship assistance for other types of debt. See if friends and family will help you if you have the means.
  • Get professional help: Reach out to a nonprofit credit counseling agency that can set up a debt management plan. You’ll pay the agency a set amount every month toward each of your debts. The agency works to negotiate a lower bill or interest rate on your behalf and, in some cases, can get your debt canceled.
  • Supplement your income: Whatever you need to do to start paying off your debt, do it now. Ask for a raise at work or move to a higher-paying job if you can. Get a side hustle. Start to sell valuable things, like furniture or expensive jewelry, to cover the outstanding debt.
  • Take out a debt consolidation loan: If you have many different types of debt, look into consolidation options. Taking out a debt consolidation loan is a way to simplify your finances — putting all of your debt in one place — and potentially paying less interest in the long run.

Bottom line

It can be tempting to pursue debt relief options that get you off the hook with creditors without having to repay what you owe. However, the short-term benefits may not be worth the potential long-lasting negative impacts that often come with these methods.

Take some time to analyze the pros and cons of each approach before deciding how to move forward. You’ll often find that getting out of debt without paying could be more harmful to your financial well-being in the long run.