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Life can be tough. This truth is evident if you’re living each day with a physical or permanent disability and have credit card debt. Add a stressful financial situation involving reduced income, limited job opportunities, and rising debt. This stress increases to the point where you are considering credit card debt forgiveness.

Trying to pay off debt while making ends meet as a disabled individual is a daunting task. Thankfully, there are laws in place and opportunities available to help your situation. In this article, you’ll learn several options to protect the income you have, and eliminate your debt.

Related Reading: Are Disability Benefits and Social Security Income Exempt from Qualifying for Bankruptcy?

Related Reading: Is there Medical Debt Forgiveness For Disabled?

First, there are a few things you should know when it comes to your debt as a disabled person. You have certain rights and protections when it comes to your debt. Here are a few tips to help you manage your debt situation.

Judgment Proof 

You’re most likely receiving some sort of Social Security Income if you’re currently disabled or permanently disabled.  (If you aren’t sure what it means to be legally disabled, you can take a free evaluation to see if you qualify for SSI.) Your creditor may take measures to start taking your income such as garnishing your wages if you’re behind. Not fun. There are state statutes and limitations they must follow.

In order for a creditor to be able to garnish your SSI wages, however, they must sue for a judgment. Federal law has specific regulations on how much they can actually seize if the creditors win a judgment. This means that although it’s not impossible for a creditor to take these steps, it’s unlikely. This might be due to the time and energy. So, before you panic and make a hasty decision, realize that in most cases, the disability income you are receiving is not in danger of being accessed by your creditors. 

That said, even when folks are judgment proof, they often want to deal with the debt. We devised a free debt relief options calculator below that can help you compare your options.

Can you be sued for credit card debt on disability?

Disability is a hardship that can affect every aspect of your life. From jobs to personal relationships, and beyond, having a disability can potentially limit you from a wide variety of things. Income, in this case, can be difficult to come by, making debt repayment an incredibly difficult task.

A common question is whether you can be sued for credit card debt when on disability. If you have become overwhelmingly in debt to one specific creditor and have missed multiple payments, you may be wondering if they are planning to come after you with a lawsuit.

While a credit card company may sue, it may not be able to collect on the judgment if your income is protected. It’s important to realize that creditors must make decisions on how to expend their resources to pursue an unpaid debt. If you are disabled and only have a minimal stream of income, a creditor may decide it is not worth their time and money to try and force you to pay them back through a lawsuit. One question is whether you want a potential judgment hanging over your head. This is your decision.

Yes, You Can Be Sued, But Will They?

Just because you receive disability income (like Social Security Disability Income) doesn’t mean you are not able to be sued. That said, it may decrease the likelihood of being sued. Creditors often realize that, because SSDI is protected from garnishment, a legal proceeding may waste their time.

Disability payments are not considered wages, and therefore, they are protected from garnishment. They are also protected from direct access via bank levies. This means that the money you get through your SSDI is completely yours to decide what to do with. Creditors cannot demand or forcibly take any of your SSDI money. Disability also helps protect your general income to a certain extent.

Garnishment Protection

There are limitations though for garnishments. Federal law requires that twice the amount you are receiving monthly in disability income remains exempt from wage garnishment.

If you are receiving $750 each month, then you’re guaranteed to have a minimum of $1,500 in the bank account where you receive your social security check. Make sure your SSI checks are directly deposited into your bank account or this protection may not apply. There are other things that you can do to stop wage garnishment.

Can Social Security Disability Benefits Be Garnished?

Another common question is whether or not your Social Security Disability benefits can be garnished by external agencies like credit card companies. Luckily, the answer is absolutely not (source: Consumer Finance Protection Bureau). Your SSDI cannot be touched by creditors and lenders. This means that all the money you receive through SSDI will go directly to you. It cannot be demanded or rerouted to those you owe money to. This protection includes debt for credit card companies, medical bills, personal loans, and other privatized creditors.

Unfortunately, this doesn’t mean that your other forms of income can’t be touched. In fact, if you are working another side job, or you have another source of income, this money is specifically not protected.

Another thing you have to consider is whether or not your debt is from private agencies or from the government. If you owe money for things like federal taxes, federal student loans, alimony, child support, or other forms of federal debt, then you may be in danger of benefit garnishments. The federal government is, in fact, authorized to garnish up to 100% of your SSDI benefits for debt that is owed to the government.

If you are a disabled individual receiving SSDI, make sure you understand your rights. For example, if a credit card company is pressuring you to pay them from your SSDI, know that they have no legal way to enforce you sending them that money. If they begin to threaten legal action to get that money from you, remind them that your SSDI is protected from privatized company’s garnishments.

Cease and Desist

 If you are in the midst of paying off debt and have fallen behind, you’re probably all too familiar with collection calls from creditors. While they are just doing their job, the continuous reminders can become borderline intimidating. 

Thankfully, the Fair Debt Collection Practices Act has provided a way for you to alleviate some of the unwanted stress. By writing out and mailing a Cease and Desist letter, to your creditors, you can put a stop to the persistent collection calls while you find a solution to your situation. 

Debt Collection While On Disability

Aside from worrying about potential lawsuits, another question that may arise is: How can credit card companies go after me for my debt while I’m on disability? Like most answers, this is a little bit nuanced. In short, yes, credit card companies can still pursue you for debt repayment. That said, they may not have a lot of incentive to pursue you for repayment.

Debt collection can be a brutal thing to go through. After missing a set amount of payments, creditors can begin going after you to try and get you to repay what you owe. If your missed payments were just an oversight, then the issue can pretty easily be fixed and the creditors will stop bugging you for payment. However, if you missed the payments because you simply couldn’t afford to make them and still be able to cover your basic living expenses, this process can be difficult.

How Debt Collectors Contact You

Debt collectors will do things like contacting you by phone, email, and mail; reaching out to your employers; and reaching out to your family members to try and get your information from them. Luckily, there are limits to what debt collectors can say and ask your employers and others who know you. They can specifically ask for your phone number and address. That said, they are not able to report that they are attempting to collect on a debt. If you hear that a debt collector disclosed to a family member or employer that they are attempting to collect on a debt, you may want to contact an attorney who specializes in debt collections to talk about your rights.

Understand Your Rights

It’s important to understand your rights if you are being pursued by debt collectors. You cannot be arrested for debt, you cannot be threatened, debt collectors cannot come to your place of work, and they cannot try to contact you at any time of day (they can only reach out from 8 a.m. to 9 p.m.).

While there are limitations to what debt collectors can do, they still have a lot of room to bother you. They can consistently call you, send letters and frequent emails, and can even pressure you with talks of a lawsuit. If you are disabled, it can be difficult to go through this process, especially if you aren’t able to do much about your financial income every month.

When this is the case, you have a couple of options available to you. First, you can take action to force your creditors to stop pestering you every day. Thankfully, the Fair Debt Collection Practices Act has provided a way for you to alleviate some of the unwanted stress. By writing out and mailing a Cease and Desist letter, to your creditors, you can put a stop to the persistent collection calls while you find a solution to your situation. While your creditors may stop reaching out to you, this doesn’t mean that the debt has disappeared or you aren’t at risk of a lawsuit.

Your Other Options

Once you have sent in your cease and desist, it may be worth looking into debt relief programs that can help you get out from underneath your debt. Programs like debt consolidation loans, credit counseling, and more, are all options that you can look into. If you are unable to make payments due to limited funds because of a disability, you may want to look into debt relief programs that are specifically for individuals with disabilities. There are often local nonprofits, or even national grant programs, that help individuals with disabilities pay off their debt and become more financially stable.

Another important thing to recognize is that the money that you receive for your disability, like SSDI, cannot be garnished by your creditors. You must willingly put that money towards your debt.

Taking the Lead

Federal law has provided some financial relief for people with a permanent disability. Unfortunately, if you used credit to make ends meet while struggling with a health problem, your debt will not immediately disappear when you qualify as a disabled individual. 

Thankfully, there are some options for folks like you who want to take the initiative in eliminating debt. Here are 3 tips that might help you push back against the load of debt you are facing. Your situation is unique so find what works best for you. 

1. Federal Student Loans: Apply for a TPD Discharge 

  If you are permanently disabled or if you are a disabled veteran, then you have the opportunity to eliminate some or all of your student loan debt. A program managed by the US Department of Education allows for certain student loans to be discharged for people with a Total & Permanent Disability (TPD). 

  If you are trying to pay off a William D. Ford Federal Direct Loan (Direct Loan) Program loan, a Federal Family Education Loan (FFEL) Program loan, and/or a Federal Perkins Loan or are trying to complete a TEACH Grant service obligation, your loan potentially qualifies for a discharge. 

You will have to prove that you are “totally and permanently disabled” in one of three ways:

  1. Provide information from a US licensed M.D. or O.D. that demonstrates your disability. 
  2. If you are a disabled veteran, you may be automatically qualified for the TPD discharge by the VA. 
  3. If you are currently receiving Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits, the Social Security Administration may automatically qualify you for the program. 

 To find out if you qualify for debt forgiveness, start by applying for a TPD discharge. Upon qualification, you’ll have your applicable student loans forgiven providing your status doesn’t change during a 3-year monitoring period and you continue to meet the program’s requirements. 

Be aware that if your TPD discharge was approved before 2018, you might be required to pay income tax on the amount of debt you were forgiven. If your student loan was approved on January 1, 2018, or later, however, you shouldn’t be responsible for any income tax.

2. Credit Card Debt: Find a Hardship Plan

 While every credit card company wants you to pay your obligations in full (with interest), most will readily settle for something if they think they might get nothing. You can use this fact, tied with your situation as a disabled individual to possibly decrease the amount of debt you owe or at least, the rate of interest you’re currently paying.

Start by creating a detailed list of all your current income minus all your monthly expenses. Here’s what to do:

  1. Call each creditor individually.
  2. Let them know your financial situation in detail.
  3. Provide a thorough description of your income and expenses
  4. Ask if they would be willing to work with you to make your payments more manageable. 

Most credit card companies have a hardship plan somewhere in their company’s policy to help individuals with difficult-to-pay loans. You might also ask if your credit card company has a cancellation policy in case of death or disability.  Finding a way to lower your interest rate, extend your payment period, or even have late fees forgiven could help you knock out your debt with less stress. 

3. All Debt: Increase your Income 

 This may seem like an impossibility. You may find it difficult to buy groceries, much less make it to an office and back each day. There are many employment opportunities that can be completed online and from home, but this is dependent on the disability. If you are serious about increasing your income and attacking your debt, here are some job possibilities for disabled workers

 If you are a disabled individual who has already taken the leap into managing your own business, you have a couple more options. Specifically, if you are a disabled veteran, you may have the chance to receive educational training and support for your small business. 

How Does Credit Card Forgiveness Work For Disabled Veterans?

If you are a disabled veteran, there may be more options available to you. Oftentimes, creditors and lender companies have special programs and exemptions for veterans. It is worth your time to call your creditor and see if they have any programs that allow veterans to alter their repayment schedule to help accommodate your situation. Here are a few other programs that you may want to look into if you are a disabled veteran trying to get out of debt:

Servicemembers Civil Relief Act

This act can help regulate and lower fees like interest rates on credit cards, auto loans, and other financial situations. If you were an active servicemember when you took out these loans or debt, it is likely that you were supposed to be given a specific interest rate that is lower than the consumer average. Take a look into your interest rates and late fees to see if your creditor is following the stipulations put forward by the Servicemembers Civil Relief Act.

Grants for Veterans

While this is not an all-encompassing program, there are thousands of grants around the nation that give assistance to veterans who are experiencing debt. Non-profits, religious organizations, and governmental organizations dedicate millions of dollars each to grants that assist disabled veterans. Websites like GrantWatch.com and Grants.gov list out hundreds of different grant options that you can apply for. A majority of these grants are need-based and require an application. That said, they are typically easy to apply for and are specifically designated for veterans.

VA Financial Counseling

If you haven’t taken advantage of this service, consider reaching out to the VA. They offer free financial counseling to retired and disabled veterans. This counseling can help you determine what your options are, how you can get out of debt, and what debt relief programs and grants you may be eligible for. Your service to our country was invaluable. Make sure you take advantage of the services offered as a thank you for your service.

VA Military Debt Consolidation Loan

The VA offers a variety of programs to help ensure veterans are given every opportunity to succeed outside of active duty. One such program is their Military Debt Consolidation Loan (MDCL). If you are in an overwhelming amount of debt, and you are struggling to make minimum payments each month, reach out to the VA and see if you qualify for a loan like this. An MDCL would allow you to combine your debt into one monthly payment and could even lower the total amount that you pay monthly by extending the period of time over which you pay off the debt.

Overall, there are many different options you should consider pursuing if you are a disabled veteran looking for a way to pay off your debt. Don’t be afraid to reach out for help. The VA has many different options that could help you get out of debt through avenues that may not be accessible to the general public.

Programs such as the  Service-Disabled Veteran Entrepreneurship Training Program (SDVETP) and the Service-Disabled Veteran-Owned Small Businesses program seek to add value to your business through monetary and educational means. 

Other Hardship and Debt Relief Options

If you have tried out the options listed above with little to no results, there are 3 more ideas for resolving your debt. At Ascend, we developed a free debt relief calculator to help you compare your options in an unbiased way. Feel free to take it below and let us know if you have any questions.

1. Debt management – consolidate your payments

The credit counseling service allows you to potentially have a reduced interest rate on your credit cards A debt management company will work to help you makes sense of your debt payments and organize them into one manageable monthly payment. 

The debt management option allows you to take a lot of the guesswork out of making payments. However, this option is best suited for someone who can almost afford his/her debt. The interest rate reduction still makes the debt too expensive for most folks who have experienced a disability.

2. Debt Settlement – Reduce the Amount you Owe

Choosing to work with a debt settlement company can be a good option if you cannot afford debt management. It is also a common option for those trying to avoid bankruptcy.

A good debt settlement company will carefully examine your financial situation. The company will communicate with your creditors for you and make a deal with your creditor for a smaller final payment balance. Furthermore, the company securely uses your money to pay off the debt in a timely manner.  Make sure to find a reputable debt settlement provider.

You may consider comparing debt settlement vs debt management to see the costs and pros and cons of both options.

3. Bankruptcy – Potentially Sacrifice Stuff to Erase Debt 

 As a last option, you have the choice of filing for bankruptcy. You may consider either a Chapter 7 or Chapter 13 Bankruptcy if your debt has become overwhelming and you’re feeling threatened by a potential foreclosure. Before you move down this option, we would recommend comparing your options via our Chapter 7 Means Test Calculator or Chapter 13 Calculator. These calculators will allow you to holistically compare your debt relief options to help you make the most informed decision. Debt relief has many pros and cons, so please tread lightly.

Related Reading: Are Disability Benefits and Social Security Income Exempt from Qualifying for Bankruptcy?
There are specific laws in place and exemptions you may qualify for that will reduce the amount of debt you will have to pay and allow you to keep some of your property and assets. While the process can take quite a while, (a few months for chapter 7 and 3-5 years for chapter 13) the end result is a more manageable financial situation for you. 

Conclusion

As you work your way through life as a disabled individual, day-to-day financial problems can take their toll. I hope these options will help you resolve your current situation and prepare you for a stronger financial future.  If debt relief is the best solution for you, compare your different relief options easily through our debt relief calculator below.

Post Author: Kyle

Kyle is an independent writer for Ascend who covers a multitude of personal finance related topics.

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