Credit Card Debt Forgiveness for the Disabled

Living with a disability can be a financial strain. It may limit your income or leave you unable to work. Credit cards can help cover gaps temporarily, but they can also leave you needing debt relief.

If you have difficulty keeping up with monthly payments, you might wonder about credit card debt forgiveness for people with disabilities. While there are no formal programs besides bankruptcy that have the potential to wipe out your credit card debt, you have a few options.

What Is Credit Card Debt Forgiveness For Disabled Americans?

Credit card debt forgiveness for disabled Americans means reducing or erasing credit card debt. In the U.S., there’s no specific program that handles this. Your best next step depends on how deep in debt you are, and whether creditors are contacting you.

Possibilities for credit card debt relief include:

• Legal protections. Disability benefits like SSDI and SSI are protected by law. You can protect them from creditors. You may need to communicate with your bank to do so.

• Hardship programs. Some credit card companies offer hardship programs when you’re in financial trouble. These programs may lower payments, reduce interest, or let you pause payments. Reach out to creditors for details.

• Nonprofits and state programs. Nonprofits and state programs may provide financial counseling or debt management plans. Groups like the National Disability Rights Network (NDRN) can connect you to local resources.

As well as hardship programs, consider the following options:

• Credit counseling. Credit counselors can help you organize and manage your finances. They might recommend a debt management plan which is a structured plan to fully repay your unsecured debts. 

• Debt settlement. Settling a debt means getting your creditor to agree to accept less than the full amount you owe, but consider it paid in full. Creditors are sometimes willing to do this if it’s clear that you can’t afford to fully repay the debt.

• Bankruptcy. If you can’t repay your debt, Chapter 7 bankruptcy may be an option. If you qualify, Chapter 7 lets you walk away from unsecured debts in a matter of months. If you can afford a payment, however, you won’t qualify for Chapter 7.

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Legal Protections For Disabled People With Credit Card Debt

Some of your assets may be protected by law, and creditors can’t take them to cover your credit card debt. Generally, the following federal benefits are protected from creditors for credit card debt:

• Social Security

• Supplemental Security Income (SSI)

• Social Security Disability Insurance (SSDI)

• Veterans benefits 

Social Security disability benefits and credit card debt

The law protects your Social Security benefits from creditors. It’s smart to keep your Social Security payments in a separate bank account so they can be easily identified as federal benefits. Use direct deposit for your SSI or SSDI payments. That lets the bank or credit union know electronically where the money comes from. Your last two months of benefits are automatically protected. 

Other funds could be frozen or garnished unless you can prove it came from exempt sources. 

If your benefits are direct-deposited to a prepaid debit card and not a bank account, you still get the same protection. 

If your benefits are sent to you in the form of a paper check and then you normally deposit the check into your bank account, you might have to prove that the money is from a protected source.

What does it mean to be judgment proof?

Being judgment proof means that even if a creditor wins against you in court, you don’t have any income or assets they could take. All of your money is protected, and the creditor doesn’t have a legal right to try to force you to pay the judgment. 

Here’s how it works.

Say you don’t pay your credit card debt, and your creditor sues you. They win the suit, and the court rules that you have to pay $1,000 to your creditor. What now?

If you don’t repay the debt, your creditor can ask the court for permission to garnish your wages (take part of each paycheck until the debt is paid off) or even take money directly from your bank account. However, creditors don’t get a blank check drawn on the Bank of You. Certain assets and income are protected by law.

For example, money in an employee-sponsored retirement plan is exempt from legal judgments under federal law. Exempt means these accounts can’t be touched even if someone wins a judgment against you.

The law also protects government benefits. If your only income is general relief (welfare) or unemployment benefits, creditors generally can’t make a claim against it. 

Other kinds of income that are protected:

• Social Security benefits

• Supplemental Security Income (SSI) benefits

• Veterans benefits

• Civil service and federal retirement and disability benefits

• Servicemember pay

• Military annuities and survivor benefits

• Federal student aid

• Railroad retirement benefits

• Financial assistance from the Federal Emergency Management Agency (FEMA)

You might be judgment proof if you have no income, if you receive government benefits, and you don’t own much in the way of valuable assets. 

How can you protect your bank accounts from garnishment?

Separating protected and unprotected money by bank account is the best way to protect your money from garnishment, i.e., being taken by creditors.

Say a creditor wins a legal judgment against you. They may provide your bank with a legitimate court order, and your bank is obligated to take money out of your account to pay the judgment. However, if the money in that account came from a protected source of income like Social Security, your creditors can’t take it. It’s untouchable by law. 

Where this gets messy is when an account contains both protected and unprotected money. When you’ve got Social Security benefits (protected) and part-time work wages (unprotected) direct-deposited in the same checking account, you’re mixing money.

Mixing protected and unprotected money could cause problems because it’s difficult to prove which funds are protected. 

How To Get Credit Card Debt Forgiveness If You Are Disabled

If you’re disabled and struggling with credit card debt, forgiveness may be possible through creditor hardship programs or legal protections. You could also take steps to shield your finances from collectors. 

Below are strategies you could try for debt forgiveness and to protect yourself.

Talk to your creditor about financial hardship relief

Credit card companies don’t have debt forgiveness programs, but many do offer relief for financial hardship—especially if you’re disabled. Contact your creditor and explain how your disability impacts your income or increases your expenses (e.g., medical costs). Provide documentation, like a doctor’s note or SSDI award letter, to strengthen your case. 

Hardship programs can provide credit card relief by:

• Postponing payments

• Reducing monthly minimum payments

• Suspending late fees or interest charges

Successfully enrolling in a hardship program requires you to convince creditors that paying the full debt is impossible due to your disability. It helps to act fast and provide proof of disability.

Here are some tips for working with credit credit card companies:

• Act fast. Contact your credit card company as soon as you know you can’t pay a bill. Set the tone that you’re sincere about paying what you can.

• Explain your situation. Your creditors need to know your story to understand your financial situation. Let them know why you can’t afford payments right now.

• Show proof. Provide proof that you’re going through a tough situation. Proof of disability could strengthen your case.

• Propose a deal. Offer a reduced payment you can afford, framing it as the best outcome for both sides. Your creditor would rather you make lower payments than have you default on debt or switch to another lender via debt consolidation.

• Get it in writing. Whatever your creditor agrees to, be sure to get a written agreement. Especially if you plan to skip or reduce your payments temporarily.

Enroll in credit counseling 

Debt management plans. Nonprofit credit counseling agencies offer debt management plans. A DMP could help you organize your finances and fully repay your unsecured debts. 

You meet with a counselor to establish a budget that lets you pay off all of your unsecured debt within three to five years. Your counselor may negotiate with creditors to lower the rates and fees you’re paying. This strategy could work if you can afford to pay off all your credit cards within three to five years, but you could use some budgeting guidance and accountability.

Settle the debts

Debt settlement. You can negotiate with creditors yourself or work with a professional debt settlement company that can negotiate on your behalf. Expert negotiators work out agreements with your creditors on your behalf, to try to get them to reduce the amount you owe. Creditors may be willing to reduce your debt if it looks like their best chance at getting repaid. Debt settlement could work if you’re experiencing ‌financial hardship and can’t afford to pay off your debts. 

Declare bankruptcy 

Bankruptcy is a legal process for dealing with debt. Chapter 7 bankruptcy can completely wipe out credit card debt. To qualify for Chapter 7, you must pass a means test showing you can’t afford a payment. Disability benefits count as exempt income and aren’t calculated in your income for the means test. 

If you can afford a payment, you won’t qualify. You could file Chapter 13 instead, which is a structured repayment plan with legal protection.

Read: Debt Relief vs. Bankruptcy: What’s Right for You?

How to Qualify For Credit Card Hardship Programs

Companies generally tend to keep quiet about credit card hardship programs, but that doesn’t mean they won’t help out in some cases. Here’s how to qualify for a credit card hardship program when you have a disability:

1. Contact the credit card company. Ask if they have any hardship programs. Ask what to do to qualify.

2. Explain your hardship. This may include explaining how your disability has hampered your ability to pay. It should also include an explanation of how you intend to keep your finances on track in the future.

3. Gather proof of need. Pull together documentation that proves you qualify for their program, you can afford to pay this much, and you need relief until this date.

4. Apply. You may need to fill out a form provided.

5. Review terms and conditions. Make sure the deal they’re offering is in your best interest, and that you can fulfill the terms.

If you qualify, your credit card company might stop you from making new charges until your payment terms are back to normal. If you can’t catch up, they may cancel your account. 

Dealing with Debt Collectors: Your Rights and Strategies

Debt collectors may reach out to you while you straighten out your debt situation. Key to dealing with debt collectors is understanding your legal protections. You can use legal measures to stop debt collectors from harassing you.

Stop debt collectors from harassing you

The Fair Debt Collection Practices Act (FDCPA) bars debt collectors from engaging in harassing behavior. If you believe a debt collector is unfairly harassing you, you can ask them to stop contacting you. 

Collectors may still sue, and in fact this might be their only option if you ask them to stop contacting you and you haven’t paid the debt.

It's a good idea to keep a copy of the debt collector’s letter for your records. If the debt collector persists, the FDCPA allows you to sue them for damages.

Key details about debt collector rules

Debt collectors will probably contact you if you owe money. Collectors can be directly employed by your creditors, independently hired, or have purchased your debt from someone else.

Unscrupulous collectors sometimes engage in shady practices designed to intimidate you. You don’t have to tolerate harassment. The FDCPA protects you, and learning about it could help you deal with debt collectors.

Here are a few details you should know.

• Collectors can't be mean or lie. They can't yell, threaten you, or try to trick you into paying more than you owe. They can’t use profanities when they talk to you. They can’t say they’re attorneys if they’re not.

• Debt collectors must be respectful. They can’t call you between 9 p.m. and 8 a.m. They can’t call you at work if you ask them not to. They can’t post publicly on social media about your debt. They can’t harass your family members about your debt.

• Debt collectors have to stop contacting you if you tell them to. Just write them a letter saying you want them to stop calling. Keep in mind that if you tell them to stop contacting you, they may not have any way of letting you know they’re planning to sue you for the debt. A surprise lawsuit could make your situation worse.

Ways To Protect Yourself From Credit Card Debt As A Disabled Person

Millions of people get into debt trouble without a disability. But a disability can create special expenses and limit your ability to earn an income, so it’s easy to understand how that could make debt especially hard to manage. Still, if you hope to continue using credit, you need a plan for meeting your financial obligations. To do that:

• Research all sources of financial aid available to you.

• Find out which of your medical expenses are covered by insurance. Find out the process to appeal a denial of coverage, in case you need to push for claim approval.

• Make a sustainable budget that takes into account any disability needs.

• Build up emergency savings whenever possible.

Make a budget that notes your recurring disability expenses, like medications or mobility aids. This could help you negotiate with creditors more effectively or qualify for aid.

Still Stuck? Debt Relief Help Is Available

If your debt becomes overwhelming and you're unlikely to catch up, consider these measures for getting some relief:

• A credit card hardship program: Find out if your credit card company offers any flexibility on your payment terms due to special circumstances.

• Debt consolidation: If your credit score is good enough to qualify for a new loan, you could borrow enough to pay off multiple smaller debts. That could reduce the number of payments, so that your finances are easier to manage.If you get a lower interest rate or a longer repayment term, you could save on total interest charges or get a lower payment.

• Credit counseling: A credit counselor could help you create a budget and a repayment plan. They could help you ongoing, until you feel more confident about managing your money.

• Debt settlement: If you can’t afford to fully repay your debts, your creditor might agree to a debt settlement. That means they accept less than what you owe, but consider it payment in full. The rest is forgiven. They may be convinced that getting something is better than getting nothing, and negotiating with you is generally cheaper than suing you.

• Bankruptcy: This is a legal process for dealing with your debts. Not everyone qualifies to walk away from their debts. Some people have to enter a payment plan instead. Talk to a bankruptcy attorney about the pros and cons for your situation. Many offer free consultations.

The most important thing is to address your debts. Dealing with credit card bills when you have a disability may not be pleasant, but taking action is empowering. It’s the best way to preserve your resources and minimize long-term credit score damage.

You can get started now by calling your creditor to ask about hardship options or scheduling a free consultation with a debt expert.