I'm not sure I understand WHY your mom would want to do this. I mean besides the obvious saving of some money. If her credit is in good standing now, *and* she can afford to pay her bills, *and* she's already paying more than minimums, what is her objective? Settling for lower amounts to pay off cards will result in them being closed and--I'm as sure as I can be--will result in negative marks on her credit reports. Why would she do that?
If she's actually in a financial bind and needs to reduce her outflow, that's one thing, but what you're describing doesn't quite sound like that.
If she wants to keep her credit cards and maintain her good credit, perhaps you/she can ask each creditor to lower her APR which, in turn, would make the debt less and take less time to pay off, but it sounds like she can pay the whole amount: "she could afford to pay off her $25k of high interest credit card debt."
Please clarify exactly what her objectives are going forward.
@HorseTears wrote:
@SoCalGardener wrote:I'm not sure I understand WHY your mom would want to do this. I mean besides the obvious saving of some money. If her credit is in good standing now, *and* she can afford to pay her bills, *and* she's already paying more than minimums, what is her objective? Settling for lower amounts to pay off cards will result in them being closed and--I'm as sure as I can be--will result in negative marks on her credit reports. Why would she do that?
If she's actually in a financial bind and needs to reduce her outflow, that's one thing, but what you're describing doesn't quite sound like that.
If she wants to keep her credit cards and maintain her good credit, perhaps you/she can ask each creditor to lower her APR which, in turn, would make the debt less and take less time to pay off, but it sounds like she can pay the whole amount: "she could afford to pay off her $25k of high interest credit card debt."
Please clarify exactly what her objectives are going forward.
Ah! So, you're saying any negotiated payoff amount would also result in the accounts being closed. I think we were thinking of a situation in which you negotitate a payoff amount, but keep the accounts open. This was really about, yes, saving money in the longrun. Your suggestion of calling to request a lower APR is interesting. But, even if something can't be negotitated, it may still make sense for her to, at least, paydown the high interest cards.
As for her overal picture, this is very topline, but...
- She's 71.
- Still works, but wants to retire by 75 - salary: $100k/yr (of course, that decision may be made for her prior to then!)
- Owes $400k on a house worth $1.3 million
- Has $300k in 401k
- Will receive a $100k pension
- Has $120k in checkings and savings (reflective of a life insurance payout for my dad)
- Receives full social security payment
- Also receives a UK state pension payment (dual citizen of UK and US)
We're interviewing CFPs right now to help build a plan for her retirement that would allow her to reduce debt, improve cashflow and identify various options/plan that would allow her to stay in her house post-retirement.
Okay, thanks, that makes much more sense now. Yes, negotiating payoffs would result in account closures AND negative marks on credit reports.
If I were in your mom's situation, I would just pay off the $25K CC debt and be done with it. Keep the cards open and keep her good credit, just get rid of the debt. Now, I am *NOT* a financial planner, so this may not at all match up with what a pro tells you, it's just what I'd do given your mom's assets and circumstances.
Also, paying off the debt outright and then contacting the CC companies to ask for lower APRs would probably help. I mean I think they'd be happier to reduce the APR if there was no balance, you know? 
@HorseTearsThis: "Has $120k in checkings and savings (reflective of a life insurance payout for my dad)" We say here finances over FICO. Just pay them all off. The savings in paying interest eventualy will come back. She has a nice nest egg and the retirement coming in. I vote just pay it off. No more stress or needed phone calls haggling to get better rates. Be done with it. Just use the cards if needed. Freedom from debt. Its a great feeling. Trust me. Even though I did BK. Not owing anything any longer improved life in general in many ways. Good Luck on your decision.
The general consensus is correct in my non-professional opinion... negotiating a lower pay off will result in negative marks on credit reports and cause the account to be closed.
If the debt was in your dad's name and not a joint account, sending a copy of the death certificate to the creditor (call before mailing, as sometimes a different address is used for notifications of death -- and some lenders need more information included with the letter) *usually* gets the lender to write off the debt and not go after the survivor for payment.
If your mom is an authorized user on an account held by her late husband, the same can be done with this debt; just be sure to remove her as an authorized user FIRST so it doesn't report on her credit.
Depending on state of residence, all joint accounts must be closed and any accounts that the decedent was primary account holder must be closed.
If saving some money is what her intentions are, perhaps her late husband's debt is where to start (if any was in his name only).
