How to Stop Paying Credit Cards Legally

Learn how to stop paying credit cards legally as the first step towards negotiating a settlement that retires your debt for less than you owe.

The long-term benefit (eliminate debt without paying the full balance owed) could be worth the short-term sacrifices (lower scores, closed accounts, higher interest charges).

The beginning steps will be painful. However, with the right plan plus persistence, the creditor may forgive a large portion of your outstanding balance.

On the other hand, a worry-free attitude could land you in court responding to a lawsuit with expensive repercussions (garnished wages, property liens, seized bank account). Be proactive.

Stop Paying Credit Cards to Settle

Stop paying credit cards in order to reach a legal settlement with the bank or collection agency for less than what you owe. Creditors rarely forgive debts to people who are current on their bills. Why would they? You need to give them a reason to negotiate and then discharge a large portion of the money that you borrowed.

Do you qualify for debt relief? (Sponsored Link) People who owe more than $10,000 in unsecured debts (credit cards, medical bills, personal loans) are eligible for outside help from an experienced company. Or, you can attempt to bargain by yourself and hope that things work out in your favor.


Stopping payments on all your credit cards entirely is the first step that many debt relief companies recommend when negotiating a settlement for less than what you owe. They suggest this measure in order to improve your position on two key bargaining points.

  1. Demonstrate financial hardship: Creditors are more likely to forgive a portion of your debt when they fear a pending bankruptcy (believe you lack the resources and capacity to fulfill your obligations). They may pull a copy of your consumer report to see how you are handling accounts with other lenders.
  2. Build an escrow fund: You need money set aside in a visible account in order to make a settlement offer enticing enough to creditors. They may forgive a portion of the balance in exchange for what you have readily available today. Diverting money away from credit card payments is the fastest way to get there.

Do you qualify for debt relief? (Sponsored Link) If you can demonstrate financial hardship while building an escrow fund at the same time, you could reach a settlement for less than what you owe. People with solid incomes and more than $10,000 in unsecured obligations fare best.

Maxing Out

Maxing out your credit cards just prior to stopping payments is rarely a good idea. It puts you in an inferior negotiating position. This behavior sends a red flag that these charges are fraudulent – especially if you purchase luxury items or take out cash advances.

Fraud is a criminal act. Obey the laws at all times and act like a responsible person.

The threat of bankruptcy is your strongest legal negotiation point. Do not weaken it by suddenly spending up to the account limit and then defaulting. A bankruptcy judge can throw out any debts obtained by fraud, misrepresentation, or false pretenses.


What Happens if You Stop Paying

Make sure that you know what happens if you stop paying your credit card bills. The short-term consequences are harsh: exploding balances, closed accounts, and damage to your credit score. Meanwhile, the long-term effects range from possible lawsuits to legally getting rid of debt without paying the full balance owed.

Set a goal and implement a strategy to weather the immediate storm and navigate to the intended outcome – eventual forgiveness – while avoiding the pitfalls: landing in court.


Be prepared for rising indebtedness, account closures, and lower FICO or Vantage scores when you first stop making credit card payments. This short-term fallout is unavoidable. Know that you must take a step back before taking two steps forward.

  1. FICO and Vantage scores will drop quickly. Non-payment hurts scores immediately (35% of the equation output). The negative history will not fall off your consumer report until 7 years after the date of first delinquency.
  2. The balance outstanding will balloon as the bank imposes late fees and switches on higher penalty interest rates. The interest compounds quickly at a higher APR.
  3. Expect all banks to reduce your limits and/or eventually close your accounts. Data from your consumer report spread the word rapidly. Have a debit card in place to handle everyday expenses as a substitute.

Balance transfers and debt consolidation loans are no longer an option once you start down this path. Both alternatives require that you meet minimum underwriting standards – which you now fail.


You are in control of the long-term outcome when defaulting on credit card payments intentionally. Your choices determine which end of the spectrum describes your destiny: granted forgiveness or served a court summons.


Credit card debt forgiveness is the long-term goal. Walking away from payments is the first step. However, you need a game plan to get there. Do not expect the banks to wipe away your obligations for no reason. You must make it attractive for them to settle.

Follow the blueprint outlined above to reach your debt forgiveness goal: demonstrate financial hardship while building an escrow fund. You can do it yourself or hire a company or lawyer.

  • Yourself: anyone can follow the basic steps and put himself or herself in a position to negotiate a settlement. The do-it-yourself method cost less.
  • Hire: debt relief companies and law firms specialize in helping borrowers reach the forgiveness goal. They cost more but know the process inside and out.


You will not go to jail if you quit making credit card payments but you could face a lawsuit – especially if you adopt a “what me worry” attitude. Ignoring the problem over the long-term will not make it go away. Most likely, a court date will result in a property lien, account seizure, or wage garnishment.

Collection agencies and credit card companies frequently sue for non-payment – whenever the cost of hiring a lawyer to issue a court summons and appear before a judge is less than the expected benefit. A civil judgment often yields a positive return.

  1. Bank account seizures can offset losses from defaulted balances
  2. Property liens against your home or car pay off when you sell the asset
  3. Wage garnishment permits creditors to recoup money over time

The statute of limitations in your state determines how long the bank or collection agency has to file a lawsuit. The statute of limitations for unsecured credit card debt ranges from 3 to 10 years. Know the laws in your state.