Quote Quoting NotSkeered
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we’re just trying to save a couple of bucks here and there.
I don't see any upside to your plan.

For one thing, if you defaulted on all the credit card debt over 4 years ago, the statute of limitations has run out and the creditors won't be successful in suing because you can raise the SOL as a defense and the lawsuit goes away.

For another, paying anything won't improve your credit reports because the balances will be charged off after you pay the portion and you'll still have to wait almost 3 years for the negative entries to drop off your credit reports..

And any money you take out of the 403(b) is not only gone forever but is taxable as ordinary income even if you manage to avoid the 10% penalty.

I hope you have cancelled the credit card accounts and cut up the cards so the accounts can't be used by either of you anymore. Leaving them active is dangerous.

I'm not sure where you come up with a $15,000 savings but way I see it is you take $17,500 out of the 403(b) and pay tax on it. Then maybe you get 1099s on the balance of the debt $32,500 and you pay tax on that. You're still paying tax on $50,000 at let's say a 25% rate for a total tax of $12,500. Add the $17,000 to that and your debt settlement has cost you $29,500. Keep the $17,000 in the 403(b) and your debt forgiveness only costs you $12,500.

You're best bet (I think) is to forget about the debts and split the 403(b) on a QDRO (Qualified Domestic Relations Order) so you each get to keep a tax deferred account of your own.