Credit Card Debt Forgiveness For Disabled: Does It Exist?

Living with a disability, whether temporary or permanent, can strain your financial situation if it means living on a limited income or being unable to work. Credit cards can help to cover the gap, but they can also leave you in debt. 

If you have difficulty keeping up with monthly payments, you might wonder whether credit card debt forgiveness for people with disabilities exists. While no federal programs can wipe the slate clean on credit card debt other than bankruptcy, there are some options for managing debt when you're disabled. 

The first line of defense: Are you judgment proof?

When a debt goes unpaid for an extended period, your creditors can take steps to collect what's owed. In the most extreme cases, your creditor might sue you in civil court to try and obtain a judgment. 

Should the creditor win the case, they could take additional steps to try and garnish your bank accounts or your wages if you have an income. However, persons with disabilities may be protected from those actions if deemed to be judgment proof.

What does it mean to be judgment proof?

Being judgment proof means that while a creditor might be able to sue you and win a case in small claims court, they're barred from enforcing the judgment through wage or bank account garnishments. 

In most cases, you're judgment proof if you:

• Owe primarily unsecured debts

• Have income that cannot be garnished

• Are exempt from property seizures or liens

• Are unlikely to see a significant change in your financial situation

Remember, your creditors can sue you even if you're judgment proof. The creditor just wouldn't be able to collect any money from the judgment. However, judgments can appear on your public record, affecting your ability to qualify for new loans or lines of credit down the line.

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How can you protect your bank accounts from garnishment?

If a creditor decides to go after your bank account to satisfy a judgment, they'll need to obtain a court order. That order must be presented to your bank and once received, the bank is obligated to turn funds over to your creditor. 

However, state and federal laws allow for exemptions to this rule. Specifically, the following types of deposits are protected from garnishment:

• Social Security benefits

• Supplemental Security Income (SSI) benefits

• Veteran’s 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)

If you receive any of these types of federal benefits via direct deposit, creditors technically cannot garnish them. State laws may protect additional deposits, including unemployment benefits, public assistance benefits, workers compensation, child support, or alimony payments. 

Understanding which of your deposits are exempt is the first step in protecting your bank account from garnishment. If you believe your deposits are exempt, just note that the burden may be on you to prove it to the court. 

You can also protect your bank account from garnishment by avoiding a judgment altogether. We'll cover some options for getting debt relief and avoiding judgments a little later. 

What to know about Social Security disability and credit card debt

Social Security disability benefits do not include any specific provisions for credit debt forgiveness. However, those benefits are protected from creditors. 

Debt collectors cannot take your Social Security benefits, including Supplemental Security Income (SSI), or any VA benefits you might receive to satisfy unpaid debts. Your bank or credit union is required to automatically protect two months' worth of benefits from garnishment. Any amounts over that can be frozen or garnished, but it's possible to get those funds back if you can show the court that they're exempt. 

Your benefits are also protected from garnishment if you have them loaded onto a prepaid debit card. To take advantage of these protections, however, you do have to opt in to direct deposit of your Social Security disability payments. 

How to get credit card debt forgiveness if you are disabled

If you'd like to ease some of the financial strain associated with credit card debt, there are some options for doing so when you have a disability. Weighing them can help you figure out what solution is best for you.

Protect your assets

As mentioned, creditors can go after your assets if they win a debt collection lawsuit against you. You can protect your assets by determining which deposits are exempt and notifying your bank of those exemptions. 

You can also protect bank accounts and other assets by responding to the lawsuit promptly once you're served notice. You can use your response to let creditors know that you believe yourself to be judgment proof.

Stop debt collectors from harassing

The Fair Debt Collection Practices Act 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. 

You'll need to send a written notice to the collection agency requesting that they cease and desist all contact. It's a good idea to keep a copy of the letter for your records. If the debt collector persists, the FDCPA allows you to sue them for damages. 

Dealing with Debt Collectors and Getting Help

Bill collectors bugging you? Know your rights.

If you owe money, chances are good that you’ll hear from collectors trying to get you to pay. They could be employed by the creditor you owe, or a professional debt collector hired by your creditor, or a completely new debt collector who has purchased your debt at a discount.

Getting contacted by debt collectors is stressful enough, but even worse when unscrupulous collectors engage in shady practices designed to intimidate you. You don’t have to tolerate harassment. There's a law called the Fair Debt Collection Practices Act (the FDCPA) that protects you and could help you learn how to 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 an attorney if they’re not.

• Debt collectors have to be respectful. They can’t call you between 9pm and 8am. 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.

• They 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.

Knowing your rights can help you feel more in control. Search for the FDCPA on the FTC.gov website and get familiar with the rules.

Keep in mind that many of the FDCPA rules apply to debt collectors but not to your original creditor.

Talk to your creditor about financial hardship relief

If you're experiencing financial hardship, your creditor might be able to offer some relief. Hardship programs can reduce your monthly payments, lower your interest rate and waive fees. 

You may need to show proof of your hardship to qualify. And if you have multiple credit cards with different companies, you'll need to reach out to each one to ask about hardship solutions. 

Tips for Working with Credit Card Companies

Most of us have financial ups and downs. That’s normal. What matters is that you’re proactive in dealing with the situation. If you’re struggling to keep up financially, talk to your billers. Here are some guidelines:

• Explain your situation. Let them know why you're having trouble paying. Many of life’s situations qualify as a legitimate financial hardship. Explain how long you think the hardship might last.

• Provide supporting information. Your creditor may want some evidence of your hardship before they can approve your request for assistance. Submit proof of your medical issue, job loss, recent divorce, death in the family, or other situation that caused your finances to go out of whack. 

Get any agreement 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.

Still Stuck? Help is Available.

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

• 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. Getting something is better than getting nothing, and negotiating with you is generally cheaper than suing you.

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

• Credit Counseling: A credit counselor could help you create a budget and a plan to repay your debts. They could help you on an ongoing basis until you feel more confident about managing your money.

• Bankruptcy: This is a legal process for dealing with your debts. Chapter 7 bankruptcy allows you to walk away from your unsecured debts, but you may have to give up some of the things you own. For instance, if you have a paid-off home or an expensive car, you might not be able to keep them out of the bankruptcy. If you have a lot of credit card debt and you don’t own a lot of assets, bankruptcy could be a viable option. Talk to a bankruptcy attorney. Many offer free consultations.

A financial advisor or debt relief specialist can listen to the details of your situation and offer personalized advice so that you can explore your options and make the choice that’s right for you.

Regardless of your debt relief option, the most important thing is not to ignore your debts. Dealing with credit card bills when you have a disability may not be pleasant, but taking action is the best way to preserve your assets and protect yourself against credit score damage.