Total Disability

Both my wife and I are now 100% disabled. Our only source of income is from disability. Most of the income is SSDI, but for the next couple of years, my wife will also be receiving about $850.00 per month from long term disability insurance she had purchased at her former job.

I had some extra income for a while (SSDI recipients are allowed to have an income of about $10,000.00 per year), but that has all disappeared. We were very dependent on that to get by. After the income was gone, we used our credit cards for things like groceries, etc. That was a big mistake but I really thought we would get past it. I am probably not the first to make that mistake. I also had 5-way coronary bypass surgery in August.

We have made the decision to get this fixed. In 24 months, my wife's $850.00 per month will cease (because she will turn age 65) and her SSDI will also cease and she will receive regular social security.

I would like to dedicate the $850.00 disability income to debt settlement for the next 24 months. We owe about $75,000.00. My understanding is that from a strictly legal standpoint, the SSDI income is exempt from collection (although we need to be careful regarding that). I am not sure about the disability insurance payment (which is tax exempt, as it was purchased with "after tax" premium payments).

We clearly qualify for chapter 7 bankruptcy. We live in a 26 year old mobile home. We have two cars that are probably worth $10K to $12K, total. There is a small retirement account of abut $3700.00. That is the total of assets we own. Being SSDI recipients, we are not required to take the "means test" in a bankruptcy proceeding. However, I would like to avoid bankruptcy, as all of our debt is credit card related. I should be able to work out decent settlements, given the circumstances.

I have researched debt settlement companies. It seems to me, given our unique income situation, that I would be paying a hefty fee for something that I can probably do myself. I would much rather see our creditors get that money, in all fairness.

One of my disabilities is that I am unable to sustain a particular train of thought for very long. I am much better in writing because I can take breaks....I have working on this post for more than 20 minutes.

It seems to me that I should really be able to work out settlements that are better than the alternative of a chapter 7 bankruptcy. I am attempting to approach this in a factual, non-emotional manner. I am aware of the "could have", "should have" manner of discourse that could evolve. It might seem cold, but my intent is to avoid those conversations. I know we screwed up, but nothing we can do now will change the past. I need to get this settled and let everyone move on. I have relatively little time left in my life (the odds are that my heart related issues will surface again in 10-15 years, if I am lucky, as things could go sideways sooner).

Any advice or tips would be greatly appreciated.

info.your solicitations will be deleted.just know that.

this right up mobile's alley.he should be along to assist you.

clovisca1949,

I appreciate your mindset here. It looks like you want to pay the creditors as much as possible as soon as possible however you can only pay what your budget affords.

You asked in your forum why one would go with a debt settlement company as opposed to negotiating debt oneself. The answer is twofold. First and foremost, when negotiating with a creditor, they are going to ask for a large lump sum upfront, if not the entire balance negotiated. Debt Settlement companies don't do that. Be very weary of any DS company that collects fees up front. Good DS companies negotiate debt down typically to about 40% of the original balance. The other reason I recommend folks to Debt Settlement companies is because they simply know what they're doing. When a customer calls a creditor and begins asking for terms of settlement, the creditor already knows what the customer is going to settle for before the phone call was ever made. With professional settlement companies it's the other way around. They know what the creditor will settle for before calling.

As a professional in the debt settlement field I can tell you that you probably wouldn't qualify for a debt settlement program as it would take at least four years at a payment of $800 +/-. If you can only afford85 for 2 years you would be wasting your money in a Debt Settlement program. I highly recommend you consider the Chapter 7 route. Consider how you want to spend your retirement.

Thanks for your response, plus I have received a couple of private messages regarding the subject.

My intention is not to disagree or argue with anyone, but I do want to engage all of you, if you would permit. I just want to be sure that I am seeing all of the issues before I make a decision.

I don't mind the phone calls. In fact, I have already discovered that talking to the creditors, being upfront and honest about my situation, and being very specific regarding my very limited options, has caused the phone calls to be curtailed to some degree.

Given the fact that at least the SSDI portion of our income, which accounts for most of what we get, is not attachable, it seems that just about anything I might offer in settlement is going to be more than what the creditors could possibly expect in chapter 7, which would be zero. I have had a brief discussion with an attorney and he told me that if I just walked away, there was not much the creditors could do, other than just bother me. Obviously, at my age, and with my health issues, that would likely ruin my credit for the rest of my natural life. His suggestion was to let the accounts run past due for a few months, then offer a few cents on the dollar, something a little higher than they might get by selling to collectors (his suggestion was 10% to 20%). Chapter 7 is available at any time, so it really makes no difference, other than the annoyance of the calls, when we might file, should we need to. In the meantime, I could accrue the extra cash (unfortunately without interest) on the DirectExpress ATM/Mastercard that is now available for use with SSDI earnings.....just leave the unused money in the DirectExpress account, rather than in a regular bank account. Even though SSDI money is not legally attachable from a bank account, collectors have been known to circumvent the law to get it.

I am at the point where I need to play some hardball with people, but at the same time I would still like to avoid bankruptcy.

I never thought i would file this. But after working with the State welfare DEpt for 30 years, all of a sudden we had no insurance, they filed bancruptcy on our medical insurance. Our job was to qualify people for medicaid. We were being sued for our medical bills even though employed with the state! Then a small house I had with my disabled brother had to be lost for County taxes severly overcharged, (house now selling for 7,000$, that is the current worth, with a mortgage company that was allowed to steal millions from owners, I Had to file bancruptcy....... I had also raised 5 children by myself. They do not care about your pride in this day and age.... Also I know of 2 cases of people on ssi that have guarnishees on their check and have been put in jail for medical bills..

You mention people who have had SSI payments garnished. I am assuming they owed taxes, student loans or some other federal bill? My understanding is that those are the only types of situations where a federal government payment can be garnished (federal payments being SSI, SSDI, SSA).

I lost my job 3 years ago, a few weeks later my father passed away. He asked that I take over and care for my mother. In addition, my husband had a massive heart attack, following his sister's brain tumor surgery. In the midst of this, I was trying to work temp. job and in the interim collect umemployment. My mother had a stroke and taken by ambulance to the hospital. Because I had to leave my job (even though I followed proper procedures) unemployment benefits were taken away from me. I searched for a job 24 hours a day....soon staying up 48 hours/day. Little support did I receive from hubby. I was taken ill and was forced to file disabililty. I am in the beginning stages of a divorce. Is there a special debt relief system for hardship cases?

Each creditor has their own policy concerning hardships. I am not a lawyer, so anything I say should be confirmed by an attorney. My understanding is that Social Security disability payments cannot be garnished unless the garnishment is for taxes, student loans, or other federal debts. If a creditor sues you and gets a judgment, they have no method to garnish money from a check issued by the government. That said, you should still be careful.

You did not say how you are receiving the money. There are three methods to get your SSDI payments. They can send you a check, which you have to cash. They can do a direct deposit into a bank account. There is also a debit card system available where they deposit the money into a debit card account.

If you are having the money deposited into a bank account, it is very important to have a checking or savings account that never has any money in it except the SSDI payments. The reason is, again as I understand the law, that it is illegal for a creditor to levy that money to satisfy a judgment. That does not mean they will not try, but if you keep the money completely separate from all other money you have, it is much easier to prove that the money is from SSDI payments. My wife and I are both receiving SSDI (my wife also gets a disability insurance payment). We each have a personal checking account where our payments are direct deposited. No other money ever goes into those accounts. We also have a regular joint checking account that is used to pay bills. We transfer money from our SSDI accounts into the bill paying account only as needed. Other money is also deposited into the bill paying account. That is called "co-mingling" and the money in that account would probably be at risk, should a judgment ever happen.

As of right now, we are several months behind on our CC payments. Most of the accounts have been sent to "lawyers/collection agents"....not one of our banks was interested in settling. We did not get a single offer (with the exception of AMEX, but that did not work out). So far, the collection people do call. I have documented our situation to them, so they know we do not have assets or income to pay the debts. They might sue us, but it would be a big waste of their time and money.

In California, a person can "homestead" their place of residence (in California, that now includes a house, condo, mobile home or boat as long as it is your primary place of residence). If you file bankruptcy, you get an exemption for a certain amount of equity in your home (each state is different). In California, the exemption (which means that your home equity is protected up to the amount of the exemption) is normally $75,000 for a married couple. That is doubled if the couple is over age 65 or disabled. That is automatic, without the need to file a homestead. However, if a homestead is filed, the equity is protected from creditors for 6 months, should the home be sold for any reason. This means that we can sell our residence (which is a mobile home) and the equity we get from the sale could be reinvested into another residence, as long as we do that within 6 months of our sale.

Sorry for the long explanation, but these are things that I have just learned over the past few months. I don't know your state, but it is worth the effort to do some investigating to be sure that you are protected as much as possible. Also, knowing about the law and knowing your rights can go a long way when dealing with creditors. It does not mean you will avoid problems, but it certainly helps when dealing with some of these people.....I have already learned that they will say just about anything, including telling lies or doing things to mislead you.

If you live in Georgia check out:

Official Code of Georgia Annotated (O.C.G.A.) Title 18-4-22+.
It deals with the very limited allowed ways disability income can be garnished. They are State & Federal taxes, Student loans, child support, alimony. NO where does it allow creditors to grab the deposited checks. WARNING, make sure your checks are not in a bank that you owe money for a defaulted Credit Cards, the bank will pull a "Set Off" and take it all without warning you.