My Husband Died of Cancer and I’m Trying to Settle My Debt. – Dana


“Dear Steve,

My husband died 2 months ago from cancer, so loss of income from social security of $1400 a month. Had over $100,000 in CC debt due to business. Business now in Chapter 11, so it can’t be repaid.

Credit card debt w/ Bank of America settled for 27%, Chase settled for 35%. AmEx says 70% lowest they will go. I owe AmEx over $45,000.

How can I get Am Ex to take a reasonable settlement offer? What percentage can I expect? The cash I have is from my husband’s life insurance, and I don’t have much. I have offered $18,000 and they turned it down. What should I do next?


Dear Dana,

American Express is a tough creditor, that’s for sure. You have three choices, keep making offers based on what you can afford and hope they accept one, pray the account is sold to a bad debt buyer that might be more reasonable, or wait to get sued for the full balance by American Express.

I’m so sorry to hear about the loss of your husband. Dealing with the loss of a loved one and money troubles is enormously stressful. But you don’t me to tell you that, you’re living through it.

One of the issues that I have with debt settlement is that unless you get all the creditors to agree to a plan you can afford to eliminate your debt with the cash on hand, it can be less than successful approach.

If just one creditor, like AMEX, refuses to settle and sues you then bankruptcy would be a logical approach to resolve that issue. But if you go bankrupt to deal with AMEX, then you could have just as well included all the creditors in the bankruptcy and solved the entire debt situation with either a bankruptcy payment plan, based on what you could afford, or a discharge of the debt. All of this without any tax liability. Why do I mention tax? Keep reading.

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I’m hoping beyond all hope that this debt was joint or in your name and not solely in your husbands name. If it was just his then the estate would have been the only asset the creditors could have looked at for repayment.

I’m glad to hear that the other creditors settled. Hopefully you are already aware that it will result in a tax liability to you for the forgiven debt so you will need to set aside cash to pay income tax on all of that debt written off. You will be taxed at your normal income tax rate and the creditors will send the IRS and you a 1099 statement at the end of the year so the dear old IRS will know about the debt forgiven and tax due.

“What should I do next,” you ask. I’d suggest that you give me some updates to the issues I brought up in this answer so I can guide you further.

You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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