Life can be tough. If you are currently living each day with a physical or permanent disability and have credit card debt, this truth is pretty evident. Add a stressful financial situation involving reduced income, limited job opportunities and rising debt and the stress increases.
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.
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.
You’re most likely receiving some sort of Social Security Income if you’re current 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.) If you are behind on your payments, your creditor may try to use some sort of measures to start taking your income such as garnishing your wages. Not fun. There are state statute 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 wins a judgement.
This means that although it’s not impossible for a creditor to take these steps, it’s unlikely they will because of the time and energy it costs them. 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.
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.
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.
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:
- Call each creditor individually.
- Let them know your financial situation in detail.
- Provide a thorough description of your income and expenses
- 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 dificult-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.
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, here are 3 more ideas for resolving your debt:
1. Debt management – consolidate your payments
This service allows you to consolidate your debts such as credit card payments, mortgage payments, or car payments, into one monthly payment. A debt management company will work to help you makes sense of your debt payments and organize them into one manageable monthly payment.
While you might end up paying a little more in the long run, this option allows you to take a lot of the guesswork out of making payments and allows you to pay off your obligations confidently.
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 is probably a good option if you cannot afford debt management, but aren’t ready for bankruptcy.
A good debt settlement company will carefully examine your financial situation, communicate with your creditors for you, make a deal with your creditor for a smaller final payment balance, and securely use your money to pay off the debt in a timely manner. Make sure to find a reputable debt settlement provider.
3. Bankruptcy – 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, you . Before you move down this option, we would recommend to compare 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.
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.
As you work your way through life as a disabled individual, day to day financial problems can take there toll – especially when it comes to debt. I hope these options will help you resolve your current situation and prepare you for a stronger financial future.