Debt collections and forgiveness: What borrowers need to consider now

Millions of Americans are grappling with significant high-interest debt, making it a costly challenge to keep up with payments in the current economic climate. Credit card balances alone surged by $21 billion in the second quarter of 2026, reaching a total of $1.26 trillion, according to data from the Federal Reserve Bank of New York.

While overall delinquency rates saw a slight improvement last quarter, new credit card delinquencies remain elevated. Unexpected expenses or income disruptions can push even diligent borrowers to question their ability to continue making payments. The compounding interest charges further exacerbate the problem, making full repayment increasingly unrealistic.

In such situations, debt forgiveness can appear as a viable solution, even if an account has not yet reached the most severe stages of delinquency. However, the common association of debt forgiveness with seriously delinquent accounts can create confusion for those struggling but still making payments.

Contrary to a common assumption, debt generally does not need to be in collections to qualify for forgiveness. Depending on the creditor and individual circumstances, it may be possible to negotiate a settlement while the original lender still holds the account. The primary factor is often demonstrating legitimate financial hardship that makes repaying the full balance unfeasible. Creditors might find accepting a partial payment preferable to the ongoing costs of pursuing the full amount, especially if a borrower has fallen behind due to job loss or other significant financial setbacks.