How To Get Out of Debt Without Paying: Is It Really Possible?

Struggling with mounting debt can feel overwhelming, and you may wonder how to get out of debt without paying the full amount you owe.

While it’s not always possible to completely eliminate debt without some form of repayment, several strategies can help you significantly reduce or even wipe out portions of your debt. From student loan forgiveness programs to bankruptcy, the right option can provide you with a clearer path to financial freedom.

Let’s explore ways to alleviate your debt burden and regain control of your financial health.

Key takeaways

• Student loan forgiveness may be an option for people who work for certain organizations as well as teachers, income-restricted individuals, and disabled persons.
• Bankruptcy stays on your credit report as a negative mark for seven to 10 years.
• Debt settlement companies are for-profit and can be risky.
• Financial institutions often offer credit counseling, and the cost is usually minimal.

Can you get rid of debt without paying?

In general, you can’t get rid of debt without paying what you owe. However, there are effective strategies to help you pay off debt more efficiently. For instance, you may be eligible for student loan forgiveness if you work in a specific sector or have a low income. Alternatively, filing for Chapter 7 bankruptcy can provide a fresh financial start.

Such strategies offer a glimmer of hope for getting some debt relief. However, they usually still require paying fees and/or a portion of your debt balance, such as through reduced monthly payments, the sale of your assets, or settlement with creditors.

Student loan forgiveness programs

Student loan forgiveness programs are a common option for getting out of debt without paying in full. They either forgive, cancel, or discharge the money you borrowed to attend college. Most of these forgiveness programs are for federal student loans and target people with income restrictions or disabilities, those who work in certain professions, or are victims of fraud.

Here are some popular student loan forgiveness programs available.

Public Service Loan Forgiveness (PSLF)

If you work full-time in a government job or for a non-profit organization, you may qualify to have part of your federal student loan forgiven under this program. Your job can be with federal, state, local, or tribal governments, including the military and AmeriCorps.

You may also qualify if you’re a medical professional working for a not-for-profit organization. Under this program, the government forgives your remaining balance after you make 120 qualifying monthly payments, which could take at least ten years.

Teacher Loan Forgiveness

If you’re a teacher, you could get up to $17,500 forgiven in federal student loans after you teach full-time for five academic years at an eligible low-income elementary or secondary school or an educational service agency. Alternatively, you could qualify for Public Service Loan Forgiveness if you work in childcare or in early childhood, public, or non-profit schools. However, you can’t use both forgiveness programs for the same period.

Income-Driven Repayment Plan (IDR)

If you’re eligible for an IDR plan, your monthly student loan payments depend on your income and the size of your family. After you’ve made payments for 20 to 25 years, the government forgives the remaining balance on your loan.

One newer, popular choice is the Saving for a Valuable Education (SAVE) plan, which can also provide interest subsidies.

You also may qualify to have your student loan debt canceled or discharged in these situations.

• You’re disabled.
• Your school closed while you were enrolled.
• The school misled you.
• You were the victim of a fraudulent loan.

How to get student loan forgiveness

You can learn more about getting federal student loan forgiveness on the Federal Student Aid website. Most loan forgiveness programs have specific requirements that you must meet to be eligible, and you must complete an application process to be approved. You may also need to be on an eligible repayment plan to qualify. Depending on current laws, your repayment plan, and your personal situation, state and federal taxes could apply to the forgiven balance.

Pros and cons of student loan forgiveness programs

Bankruptcy

Filing for bankruptcy is another common way to get out of debt without paying. However, you should consider it a last resort after you’ve exhausted all other debt relief and management options. Additionally, know that it usually doesn’t address certain debts, including student loans, taxes, fines, child support, and alimony.

A bankruptcy significantly impacts your credit since it remains on your credit report for up to ten years, making it difficult to borrow money for a car or home. Bad credit can also hinder your ability to rent an apartment, get insurance, or even secure a cell phone plan.

But if you're in severe financial trouble and already have damaged credit, bankruptcy could offer a clean slate to help you rebuild your financial health. There are two types of bankruptcy you can consider: Chapter 7 and Chapter 13.

Chapter 7

With this type of bankruptcy, you could get a complete discharge of much of your unsecured debts like credit card debt and medical bills. However, you’ll also have to liquidate much of your assets. During the process, a court-appointed trustee will oversee the sale of your non-exempt assets, and that money will go toward your debts. While Chapter 7 can provide a fresh financial start, consider these significant consequences first.

Chapter 13

Unlike Chapter 7, Chapter 13 bankruptcy doesn’t require liquidating your assets. Instead, it involves reorganizing your debts and creating a plan to pay them off in three to five years. It can be useful if you’re facing foreclosure since filing Chapter 13 can help stop the process and let you keep your home while you catch up on missed mortgage payments.

Following your repayment plan, you’ll make monthly payments to a bankruptcy trustee who distributes the funds to your creditors. When you’ve completed your repayment plan, you may qualify to have the remaining balances discharged.

How to file for bankruptcy

Filing for bankruptcy involves several key steps. Within 180 days before you file, you must complete credit counseling from a government-approved agency and file a certificate of course completion with the bankruptcy court. You’ll then need to complete the necessary bankruptcy forms detailing your financial situation and file them with the bankruptcy court. There is usually a filing fee, which typically ranges between $300 and $400.

You can do this process yourself or hire an attorney to help. Since bankruptcy laws are complex and the process can be overwhelming, it's often advisable to seek professional guidance. Attorney fees can substantially increase your costs, so consider looking into free and low-cost legal aid options.

Once you’ve filed, an automatic stay goes into effect, temporarily halting most collection actions against you. You may then need to submit to a bankruptcy means test, which assesses your income, expenses, and family size to determine if you should file for Chapter 7 or Chapter 13 bankruptcy. To be eligible for Chapter 7 bankruptcy, your average income over six months must be less than the median income in your state for the same household size. If it isn’t, Chapter 13 may be the more appropriate option.

Pros and cons of bankruptcy

Debt settlement programs

Debt settlement programs offer a way to reduce your overall debt by negotiating with creditors to accept a lump sum payment of less than the full amount owed. You can do this independently or hire a debt settlement company to negotiate with creditors on your behalf.

Debt settlement companies typically charge you a fee. They usually instruct you to stop making regular payments to your creditors and instead make deposits into a dedicated account which eventually go toward paying the reduced settlement amount.

While the idea of working with a debt settlement company might sound good, it comes with some risks. Stopping payments to your creditors can hurt your credit score, incur late fees and interest, and result in collection efforts. Also, not all debt settlement companies are legitimate, so some may charge you without providing any actual results.

How to settle your debt

Debt settlement is most effective for dealing with credit card debt. If you decide to hire a debt settlement company for help, know that they must legally disclose information on fees, terms of service, the results timeline, and the disadvantages of halting payments to your creditors. The company also can’t collect fees until it has settled your debt.

You don’t necessarily need to hire a company since you can contact your creditors and negotiate a settlement yourself. Start by assessing your financial situation and determining what you can reasonably afford to pay in a lump sum. Then, contact each creditor to explain your hardship and propose a settlement amount. Be prepared to negotiate and provide documentation to support your financial difficulties. Once you have an agreement, get the terms in writing before you make any payments.

All of that can be daunting, though, so if you do decide to work with a debt settlement company, this list of the best credit repair companies could be a good place to start.

Pros and cons of debt settlement

Alternatives for better managing debt payments

Programs that help you get out of debt without paying – like bankruptcy, student loan forgiveness, and debt settlement – can have various costs, tax implications, and negative financial effects. It’s worth considering some other options that help you get out of debt faster by better managing your debt payments.

Credit counseling services

Credit counseling services can help you manage your debt and improve your financial health. These non-profit organizations offer free or low-cost advice on budgeting, debt repayment strategies, and financial planning. A certified credit counselor works with you to assess your financial situation, develop a personalized action plan, and potentially negotiate with creditors to lower interest rates or waive fees. You can often find credit counselors at financial institutions and local consumer protection agencies.

Debt management plans

Some credit counseling agencies offer debt management plans to help you pay off the money you owe. These plans are for unsecured debts like medical bills, credit cards, and student loans. With a debt management plan, you make a single monthly payment to the credit counselor, and they use that money to pay your creditors. In some cases, they negotiate lower interest rates on your debt, which can help you pay it off faster. Note that you might pay various fees to set up and stay on the plan.

Balance transfer credit cards

If you have significant credit card debt but a relatively good credit score, consider transferring the outstanding balance to a credit card that offers 0% interest for a limited time. Some cards charge interest rates over 20%, which means much of your payments go toward that interest. This can make it feel like you’ll never pay off the debt. With a 0% balance transfer credit card, you’ll still have to pay off the debt, but your payments pay down the principal balance. Just keep in mind that creditors often charge a balance transfer fee of 3% to 5%.

Some of the best balance transfer card offers provide 12 to 21 months of interest-free financing. One option is the Wells Fargo Reflect^® Card, which has a 0% intro APR for 21 months from account opening on qualifying balance transfers, then 17.49%, 23.99%, or 29.24% Variable. There’s a balance transfer fee of 5%, min: $5. It also features cell phone protection (subject to a $25 deductible), roadside assistance, and personalized deals.

If you decide to take advantage of a 0% balance transfer offer, try to pay off the balance by the end of the promotional period. Otherwise, you’ll pay interest on the remainder.

Debt consolidation loans

Another way to better manage your debt, especially if you have several different credit cards, is to take out a debt consolidation loan. Debt consolidation loans enable you to combine multiple debts into a single loan with a potentially lower interest rate and a single monthly payment.

One significant drawback of debt consolidation loans is that some options, such as home equity loans, require collateral to secure the loan. If you fail to make timely payments, your inability to repay the loan could lead to foreclosure or repossession.

You can look for unsecured debt consolidation loans to reduce this risk. Our list of the best personal loan companies is a good starting point.

FAQ

Bottom line

Getting rid of debt is tough, and managing and eliminating it involves various strategies. Ultimately, you should weigh the pros and cons of each option to make an informed decision that aligns with your financial situation and long-term goals.

If you’re in a specific sector or face financial hardship, student loan forgiveness programs could offer relief without the burden of full repayment. Bankruptcy, while a last resort, provides a fresh start but comes with significant long-term credit implications. Debt settlement can reduce your owed amounts, but it carries risks to your credit score and is a common target for scams.

If those debt relief options don’t suit your financial situation, credit counseling and debt management plans can offer professional guidance and more manageable payment structures.