This guide is for people who have no money to pay off their debts. Use this guide to:
Having debt can be stressful and overwhelming. If you’ve fallen behind on payments or have debts you can no longer afford to pay back, you may be wondering if it’s possible to write them off and get a fresh start. Writing off debt is not always easy, but in some cases, it may be an option.
What Does It Mean to Write Off Debt?
Writing off debt means getting released from the legal obligation to pay back money you owe When a creditor agrees to write off debt, they are essentially forgiving the debt and agreeing that you no longer owe them money
Debt write-offs can be:
- Full: The entire debt balance is forgiven.
- Partial: Only part of the debt is forgiven. You would still be responsible for repaying the remainder.
A debt write-off results in the debt being reduced or eliminated from your account balance, It will show as written off or partially written off on your credit report
When Can Creditors Write Off Debts?
Creditors are generally reluctant to write off debts completely. After all, they are in the business of lending money and collecting payments. However, in some cases, creditors may determine that trying to collect on a debt is no longer worth the effort.
Here are some common situations when a creditor might be willing to write off debt:
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You can prove financial hardship: If you can demonstrate that your financial situation makes it impossible for you to repay the debt now or in the foreseeable future, some creditors may write it off. This usually requires evidence like income statements, bank statements, and expense reports.
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The debt has been sold to collections: Once a debt goes to collections, the original creditor has already written it off. You may be able to negotiate a pay for delete or debt settlement for less than the full amount with the collection agency.
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The debt is very old or past the statute of limitations: If the debt is no longer legally enforceable due to age, creditors have little recourse to collect. Offering a small lump sum settlement may convince them to write off the remainder.
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You file for bankruptcy: Filing for Chapter 7 bankruptcy results in most unsecured debts being discharged. This effectively writes them off since you are no longer legally required to pay.
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The creditor goes out of business: If a creditor declares bankruptcy or goes out of business, debts they are owed may be written off.
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You can only make token payments: If you can show that the most you could afford to pay is a token amount like $5/month, the creditor may find it not worth pursuing you for the debt.
How to Request Debt Write-Offs
If your circumstances prevent you from repaying your debts, you can request creditors write them off. Here are some tips for doing this successfully:
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Stop making payments. This shows the creditor you cannot afford to pay and removes incentive for them to collect. Focus on paying for necessities instead.
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Gather evidence of hardship. Creditors will need to verify your inability to pay. Collect documents like pay stubs, bank statements, medical bills, and a budget showing your expenses exceed income.
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Use debt write-off template letters. Send requests in writing and keep copies. Template letters make it easy to customize requests for each creditor.
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Start with small debts first. You’re more likely to get write-offs approved if you start with smaller debt amounts. This can create momentum to tackle larger debts.
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Escalate if denied. If creditors initially refuse, resend your request and include any new evidence or information that may change their mind.
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Consider partial settlements. If a full write-off is not possible, propose a lump sum payment to settle a portion of the debt.
Pros and Cons of Debt Write-Offs
Like any major financial move, debt write-offs come with both advantages and drawbacks:
Pros
- Eliminates or reduces debts
- Stops collections activities and harassment
- Frees up income to pay current expenses
- Provides emotional relief
Cons
- Damages credit score
- Tax consequences if forgiven debt exceeds $600
- Creditors still legally own the debt and could resume collections unless settled
- Future lenders may see you as higher risk
Overall, weigh these factors against your personal situation. For some consumers, the benefits of reduced or eliminated debt are worth the credit impacts.
Alternatives to Debt Write-Offs
If creditors refuse to write off your accounts, other options may help handle debts you cannot pay:
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Debt management plan: A DMP allows you to consolidate debts into one payment and negotiate reduced interest rates.
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Debt settlement: You can offer lump sum settlements to creditors for less than the full balance. Each creditor must agree.
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Bankruptcy: Filing for bankruptcy discharges many debts. Chapter 7 writes off unsecured debts while Chapter 13 allows 3-5 years to repay a portion.
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Ignoring debts: If debts are past the statute of limitations for collections, you may be able to simply stop paying without consequence.
Before choosing any option, consult reputable credit counseling agencies to understand the full impacts. Nonprofit agencies provide advice for free.
Key Takeaways
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Writing off debt removes the legal obligation to pay and clears the debt from your accounts. Creditors rarely agree to full write-offs except in cases of proven hardship.
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To request a write-off, stop payments, gather evidence of inability to pay, use template letters, and escalate if denied. Be prepared to negotiate partial settlements or lump sum discounts.
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Debt write-offs provide relief but can hurt credit. Other debt solutions like debt management plans, settlements, or bankruptcy may be alternatives if creditors refuse to write off debts.
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Seek help from nonprofit credit counseling agencies. They can review your full financial situation and recommend the debt solution most likely to work for your circumstances.
While debt write-offs are not guaranteed, they are possible in some situations. With persistence and evidence of true hardship, you may be able to negotiate with creditors and gain freedom from debts you cannot repay.
Mortgage debt from a previous home
In some situations where you have had your home repossessed, or handed back the keys to your mortgage lender, you may later be told you still owe money. This happens when the amount your home is sold for is not enough to pay the outstanding mortgage and any secured loans.
Money you still owe to your mortgage or secured loan lender in this situation, is called a mortgage shortfall. Sometimes these can be large amounts. Nevertheless, you can consider a write-off request if your situation requires it. See the section ‘Ask your lender not to pursue the debt’ in our Mortgage shortfalls guide. This includes an Ask your mortgage lender to write off your debt sample letter which you can use to make your request.
Gas and electricity arrears
Some energy companies have separate funds which can make payments to clear energy debts and, sometimes, other kinds of payments too. See the section ‘I’m struggling to pay my energy bills’ in our Gas and Electric arrears guide for more information about applying for help to clear your debt.
Magistrates have the power to cancel or ‘remit’ a fine, although they do it rarely and only in particular circumstances. This also applies to a fine arising from the non-payment of a TV licence. See the section ‘Remitting the fine’ in our Magistrates’ court fines guide for more information.
The council has the ability to cancel a penalty charge in exceptional circumstances. See the section ‘What if I don’t fit into these grounds?’ in our Penalty charge notices guide
In limited circumstances the Child Maintenance Service can write off arrears of child maintenance, including arrears in old Child Support Agency cases, if it thinks that it would be unfair or not appropriate to continue to pursue collection. It does not use this discretion very frequently.
Contact us for advice about what circumstances allow the Child Maintenance Service to use its discretion to write off arrears.
HM Revenue and Customs (HMRC) rarely agree to write off a tax credit overpayment debt. However, in particular circumstances they may agree to release the person from their liability to pay the debt. This is called remission. They may agree to consider remission when the person owing the debt has mental health issues or is suffering from severe hardship, or when they are satisfied that the person should not continue to be pursued for payment of the debt. Read more about HMRC’s approach to recovering overpayments on GOV.Us page called Tax credits: what happens if you’ve been paid too much (COP26). HMRC runs a special Payment Helpline on 0345 302 1429 which you can contact to discuss why you want HMRC to stop recovery of the debt. Contact us for advice about special circumstances that HMRC may be willing to take into account when considering whether to pursue recovery of a tax credit overpayment debt.
In exceptional circumstances, the Department for Work and Pensions (DWP) may decide not to recover an overpayment, or part of it. This could be where recovery is likely to cause you or your immediate family significant hardship and be a threat to you or your family’s health or welfare. If you feel that repaying the overpayment will cause you significant hardship, you should contact DWP using the details on the letter they sent you. If your debt is an overpayment of Housing Benefit, contact your local council, which has a similar kind of discretion not to recover the debt. They may ask for evidence of the hardship before making a decision. Contact us for advice about what kind of hardship is taken into account when the DWP or your local council decides to not recover or to write off the overpayment debt.
HMRC may consider a request not to pursue you for an income tax bill in particular circumstances. This is sometimes known as HMRC ‘remitting’ the debt. You will usually need to show that:
- you have very little or no spare income after your essential household bills and this is likely to continue for a long time; and
- you have no assets which could be sold to raise money to help clear the debt.
For example, these circumstances may apply if you:
- are elderly;
- have a disability or long-term illness; or
- are long-term unemployed.
HMRC will not formally write off a tax debt in these circumstances, but may agree not to pursue it based on your circumstances. This still allows HMRC to pursue the debt if your situation improves.
In certain circumstances, the council can consider remitting business rates. This means they will allow you not to pay all, or part, of your business rates bill. In practice, local authorities do not agree to this very often. However, it may be worthwhile making an application if you feel that you can show you are in exceptional circumstances. See the section ‘Remitting business rates’ in our [Business debts]() guide.
How Does Debt Write Off Work?
FAQ
Can I get my debt written off?
The people you owe usually only agree to write off debts in the most serious cases. They will ask for proof of your illness or injury. They might agree not to contact you for a while, even if they do not write it off. They may also be able to help you if you are dealing with a mental health issue.
Can I write off personal debt?
To be deductible, a debt must be a bona fide loan with an expectation of repayment and may include interest and a promissory note. The debt must be 100% worthless before it can be deducted. Documented efforts to collect the debt must be made, such as letters, invoices, and phone calls.May 12, 2025
What happens after 7 years of not paying debt?
What are the consequences of a debt write off?
If your debt is written off debt in full, it’ll usually be marked in your credit history as paid. However, if you’ve missed any payments, paid less than the contractual agreement, or the account has been defaulted before you paid off the balance, it’ll be recorded on your file for six years.
How do you qualify for a debt write off?
Debt relief order (DRO) :A way to have your debts written off if you have a relatively low level of debt and have few assets Individual voluntary arrangement (IVA): A formal agreement where you to make affordable payments to your debts, usually over five or six years.
What is the best method to write off bad debt?
There are two methods you can use to write off a bad account: The direct write-off method takes place after the account receivable was recorded. You must credit the accounts receivable and debit the bad debts expense to write it off. With the allowance method, you predict that you won’t receive payment for credit sales from all your customers.
How does writing off bad debt affect the balance sheet?
If your debt is written off debt in full, it’ll usually be marked in your credit history as paid. However, if you’ve missed any payments, paid less than the contractual agreement, or the account has been defaulted before you paid off the balance, it’ll be recorded on your file for six years.