You can negotiate a debt settlement yourself, but a settlement means paying a lump sum, so it only works if you can find one. If you want to know how to negotiate debt settlement on your own, start by working out whether you can raise that money. Without a lump sum, other routes fit better, and there is no legal way to simply stop paying a credit card without consequences.
Can you legally stop paying a credit card?
Searches for how to stop paying credit cards legally, or how to stop paying credit card debt and stop worrying about it, promise something no UK route delivers. What happens if you stop paying credit cards is that missed payments are recorded on your credit file, and after several months the lender can issue a default notice that gives you at least 14 days to put things right. If you don't, the account can default, be passed to a debt collector or sold on, and the lender can take you to court. A default stays on your credit file for six years, and so does a county court judgment.
The legal routes to relief are different: breathing space, a debt management plan, a Debt Relief Order, or a negotiated settlement. Free advisers can tell you which fits.
When a settlement works
A full and final settlement means paying a lump sum and the creditor agreeing to write off the rest. It is realistic if you can raise money from savings, an inheritance, a gift from family or the sale of an asset. If the lump sum clears the full balance, the debt is marked as satisfied on your credit file. If it is a partial settlement, the account is recorded as only partly settled, which future lenders will see.
How to negotiate credit card debt settlement yourself
- List every debt and the exact balance owed to each creditor. Offering to one creditor while ignoring the rest can leave you with new problems.
- Share the lump sum fairly. Offer each creditor the same percentage of what they are owed. With £3,500 and debts of £3,200 on a card, £1,000 to a bank and £800 to a payday lender, the total is £5,000, so you could offer 70% of each balance: £2,240, £700 and £560.
- Write to each creditor. Say the money is offered in full and final settlement of the account, state the amount, and ask them to confirm in writing that they accept and how the account will be recorded.
- Don't pay until you have written acceptance. A phone call isn't enough.
- Pay exactly as agreed, and keep every letter for at least six years.
- If an offer is refused, you can negotiate, but don't give one creditor a better share than the others.
There is no set percentage that creditors must accept; a reasonable offer is whatever they agree to. You can do all of this for free. StepChange, National Debtline and Citizens Advice can help with the letters, and you should avoid any company that charges a fee to negotiate for you.
If you have no lump sum
- Reduced payments. Creditors may accept smaller payments if you show them a budget, but this is recorded on your credit file.
- Debt management plan. One monthly payment shared between creditors, available free through the charities above.
- Breathing space. Up to 60 days of protection from enforcement while you get advice.
- Debt Relief Order. If you have little income and very few assets, see our guide to the Debt Relief Order.
Once your debts are sorted, see credit cards for bad credit in the UK for how to rebuild your credit file safely.