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Credit card settlement & Retirement


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My situation is a little different that most and I was hoping to get a little help.

I have about $53,000 in credit card debt. I am now current on all my payments, but I have not always been, and have a couple accounts closed because of late payments.

I will be retiring soon, and after retirement I will not be able to make the credit card payments, and most likely will be forced into bankruptcy, which I would like to avoid.

I do have a little money in a 401(K) and would be willing to put it to settling.

If I could get my card companies to settle for about 65%, I could make things work.

I would really need to settle before I retire, but will the card companies talk to me while I am current with my payments?

Because of the hours that I work, it would be difficult for me to handle this myself, but from what I have read, it seems like most settlement companies are scams, or at least not geared for my situation.

I am not overly concerned about my credit rating at this point, more concerned with a comfortable retirement.

Any ideas or suggestions would be appreciated.

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The credit card companies are not going to talk to you about settlement unless you are behind/delinquent on your payments

Yes, most supposed "settlement" companies are overcharging scams that do very little to help. There are some here on this forum that have had a few successful stories- but not many. And most here will advise you to stay away from them.

I do empathize with your situation, but - do you really want to take your retirement money to settle these debts? You've worked hard for what's in your 401K.

You stated your more concerned with retirement than credit at this point- I'm not advocating BK (I have a past BK, and it wasn't pretty)- however, in your situation- maybe you should talk to a BK attorney and find out what the payments would be in a Chap 13 first. You may come out better in the long run and save your 401K.

You never know when you may need your "nest egg"

I only say this because I just witnessed my parents use their entire 401K to pay debt and it was not worth it. They have no extra money at all, and actually ended up loosing their home to foreclosure.

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I would go to the NCBA site and find one or two member BK attorneys and get their professional opinion. I agree, the last thing I would do is use that 401K. Even if you could make the deal at 65%, think of the tax implications of both using all that tax deferred maoney and the 1099 liability you'll have at a time your income drops dramatically.

No one wants to go BK, but sometime it is the only way to a better personal future.

And in my opinio, your card issuers will not work with you unless you are 6 or so months behind.

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Thanks for the replies.

I admit, I had not thought of the tax angle. Let’s see if my math and reasoning are correct. If I settle 53,000 for 65%, that would be 34,450. A savings of 18,550.

I would have to pay taxes on the 34,450 withdrawn from my 401(k) plus the 18,550 in unpaid debt, for a total of (surprise) 53,000. If I am in the 25% bracket, this would be 13,250 in taxes. 18,550 saved in settlement minus 13,250 in tax = 5300 total saved?

Of course if I withdraw the entire 53,000 and just pay off everything without settlement, I still have 13,250 in tax, with NO savings?

Chapter 13 after retirement will not work; will not have the income to make payments. Chapter 7 is not an option for me for varies reasons.

I will most likely work 1 more year, but I need to have this credit card debt gone by then.

Any ideas?


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