Credit card balances stood at $1.263 trillion in the second quarter of 2026, according to the Federal Reserve Bank of New York’s household debt report. The rate at which card balances fell into serious delinquency, 90 or more days past due, was 6.97%, about flat from 6.93% a year earlier.
Older cardholders stand out. A 24/7 Wall St. analysis of New York Fed data found that the serious delinquency rate for borrowers 70 and older reached 6.3% in the second quarter, the highest since the third quarter of 2011. The rate for ages 60 to 69 was 5.0%.
Debt settlement companies promise to negotiate balances down for less than you owe, and that pitch lands hard when a card payment no longer fits the budget. The Federal Trade Commission’s guidance on the approach is more cautious than the advertising.
Social Security has some protections
Start by checking what a card collector can actually touch. The Consumer Financial Protection Bureau says that when federal benefits arrive by direct deposit, banks must automatically protect two months of those funds if a garnishment order hits the account.
Social Security can be taken for back taxes, federal student loans, child support and alimony. Credit card debt is not on that list.
That does not stop the calls or the credit damage. It does change what is at stake for someone living mostly on benefits.
Skipped payments and lawsuits
Settlement programs often encourage you to stop paying creditors while money builds up for an eventual offer. The FTC warns that late fees and penalties may keep growing during that time and that the missed payments hurt your credit. Collectors may keep calling, and you could be sued while you wait for a settlement.
The FTC also notes that many people struggle to keep up the payments long enough to settle all or even some of their debts, and drop out of the program.
Forgiven debt can become a tax bill
The IRS says debt canceled for less than the amount owed is generally taxable, and creditors may send a Form 1099-C reporting it. Suppose a $20,000 balance settles for $12,000. The $8,000 difference could count as income for that year.
An exclusion applies to the extent you are insolvent, meaning your debts exceed your assets, and claiming it requires filing Form 982 with your return. A tax professional can tell you whether it would apply to you.
Fees come only after results
A settlement company cannot legally collect its fee before it settles a debt. The FTC says anyone asking for money up front, before settling any debts or enrolling you in a debt management plan, is a scammer.
Free options to try first
The FTC points to nonprofit credit counseling as an alternative, and notes you can also contact creditors and negotiate yourself, for free.
Demand is rising: Money Management International, a large nonprofit, reported nearly 15,000 new debt management plan clients in the first half of 2026, its highest year-to-date total since 2017, with balances averaging about $40,000.
For a smaller balance, stopping interest first may be enough. Our five moves for beating 22% card interest start with a balance transfer and budget leaks. The credit card debt page in our Solutions Center lays out payoff and relief options side by side.
When settlement still fits
Borrowers with large balances and little realistic path to repayment may reasonably price out a settlement provider. If you have $15,000 or more in unsecured debt, National Debt Relief is one of the most established debt-relief providers in the U.S.
The company has helped more than 500,000 people and holds an A+ rating from the Better Business Bureau. Fill out a quick form and a certified debt specialist reviews your situation. If National Debt Relief can help, it builds an affordable plan and estimates when you could be debt-free.
There is no upfront fee and no obligation to get started, and it can help with most unsecured debt, including credit cards, personal loans, medical bills and even some student loan debt.
Before signing with any provider, get the fee, the program length and what happens to your accounts in the meantime in writing, and ask a tax professional whether forgiven balances would count as income for you.
Add a Comment