Credit Card Debt Forgiveness For Disabled[yoast-breadcrumb]
Credit Card Debt Forgiveness For The Disabled: Options For Relief
Living with a disability can put enormous financial strain on individuals and families. Medical bills, assistive devices, home modifications, transportation, and other disability-related costs quickly add up. At the same time, disabilities often limit one’s ability to work and earn an income.Many turn to credit cards to cover disability-related expenses. But with limited income, credit card debt can quickly snowball out of control for the disabled. Unpaid credit card bills lead to late fees, penalty interest rates, and calls from collection agencies. Creditors may even file lawsuits over the unpaid debts.For people on fixed disability incomes, credit card debt can feel like an impossible burden. The good news is that you have options for managing credit card debt as a disabled person. While there are no federal credit card debt forgiveness programs specifically for the disabled, you can take steps to ease your debt burden.
Are Disability Benefits Protected From Debt Collectors?
An important first question is whether your disability income can be garnished for unpaid credit card bills. The answer is generally no. Key disability benefits are legally protected:
- Social Security Disability Income (SSDI) – These benefits are fully protected from creditors by federal law. Debt collectors cannot garnish SSDI payments to satisfy judgments, even if you have a bank account where the funds are deposited.
- Supplemental Security Income (SSI) – SSI benefits are also fully protected from garnishment by federal law.
- Veterans Disability Benefits – Creditors cannot garnish VA disability compensation and pension payments.
- Federal Employee Disability Retirement Benefits – These benefits are protected under 5 USC §8470.
- Railroad Retirement Disability Annuities – Protected from garnishment under 45 US Code §231m.
- Civil Service Retirement System (CSRS) Disability Benefits – Protected by 5 USC §8346.
So if you rely solely on government disability benefits, creditors and collectors have limited recourse to force you to pay. But that doesn’t get rid of the debt itself. Unpaid debts may still damage your credit score over time. And you could still face annoying collection calls.To proactively address credit card debt, consider steps like contacting your creditors, debt management plans, debt settlement, or bankruptcy.
Contact Your Creditors About Hardship Programs
If disability has made it difficult to keep up with credit card payments, contact your creditors to ask about hardship assistance. Most major credit card companies have hardship programs to help consumers experiencing financial difficulties. When you call, explain your situation and disability-related hardship. Be prepared to share documents verifying your income, expenses, and disability if requested. Ask about:
- Lower interest rates – This reduces the cost of carrying debt.
- Lower minimum payments – More affordable monthly payments.
- Payment deferral – Temporarily postponing payments for a set time.
- Settling for less – Creditors may agree to settle for a portion of the balance.
- Waiving fees – Late fees and over-limit fees can be waived in hardship situations.
Hardship programs won’t make debts disappear. But they can provide some breathing room. Be sure to get any agreement for modified payment terms in writing.
Consider A Debt Management Plan
Non-profit credit counseling agencies can set up debt management plans (DMPs) for consumers struggling with high credit card balances. Here’s how they work:
- You make one monthly payment to the agency. They distribute funds to your creditors.
- Creditors may agree to lower interest rates and waive certain fees.
- You pay off debts faster by paying less interest.
- Creditors may agree to settle balances for less than the full amount.
- Counselors provide education on managing finances.
You do pay enrollment and monthly fees for a DMP, so compare costs to potential savings. Make sure the agency is reputable before enrolling. A DMP could provide structure and savings to help tackle credit card debt.
Negotiate With Creditors For A Lump Sum Settlement
When creditors don’t expect to be fully repaid, they may agree to settle debts for a lump sum that is less than the balance owed. This is called debt settlement.The process works like this:
- Stop making payments and allow accounts to become delinquent.
- Debt settlement company or attorney negotiates with creditors for a reduced settlement.
- You pay the negotiated amount as a lump sum.
- The creditor agrees to forgive the remaining balance.
Settling debts for less than owed can save substantially. Just beware of high fees some settlement firms charge. And missed payments will damage credit scores. Debt settlement works best for those with very limited means to repay.
Consider Bankruptcy For A Fresh Start
Filing for bankruptcy stops collection calls, lawsuits, garnishments, and foreclosures. Debt balances can be discharged entirely in some cases. Assets like homes, cars, and retirement funds can often be retained.However, bankruptcy damages credit for years. And not all debts can be discharged. Consulting with a bankruptcy attorney helps weigh the pros and cons for your situation.Types of bankruptcy to consider:
- Chapter 7 – Liquidates assets to pay creditors. Remaining dischargeable debts are wiped out.
- Chapter 13 – Establishes 3-5 year repayment plan for debts.
Bankruptcy provides the most complete debt relief. But also consider the long-term credit impacts.
Avoid Debt Relief Scams Targeting The Disabled
Be cautious of debt relief companies that promise to make credit card debt instantly disappear. Common red flags of debt relief scams include:
- Charging substantial upfront fees before providing services.
- Guaranteeing they can remove all debt.
- Advising you to stop communicating with creditors.
- Telling you to stop making at least minimum payments.
- Making verbal promises that differ from the written contract.
The Federal Trade Commission provides guidance on avoiding debt relief scams. Get promises in writing and consult an attorney before signing anything. Don’t believe unrealistic claims.
Take Control Of Your Credit Card Debt
Coping with disability and credit card debt can feel overwhelming. But staying in denial makes the problem worse. Consider all options – creditor hardship programs, debt management plans, debt settlement, or bankruptcy. An empathetic credit counseling agency or attorney can help find the debt relief solution for your unique situation.With the right approach, you can ease credit card debt burdens and regain financial stability. Don’t struggle alone. Seek assistance to guide you.