Disabled and thinking about bankruptcy with less than 10k in debt…what should I do?

I’m currently disabled and can’t work, and I’m appealing a denial for Long-Term Disability (LTD). If I win the appeal, I expect around $5,000 in back pay and $1,500 monthly. I’ve also applied for government disability, but that was denied too, and I’m appealing that decision as well.

At the moment, my only income is $300 a month from tutoring online, which barely helps with my bills. I don’t own a car, and right now I can’t afford one either.

I’m living with my partner who has been very understanding. I don’t need to contribute to rent since my income is so low, but I try to help out with utilities and food. My partner has a car, so while getting my own isn’t urgent, it’s something I would like eventually.

Here’s what I owe:

  • $30,000 in student loans (I’m working on getting a discharge due to my disability).
  • $6,500 on a Discover credit card (currently 60 days late).
  • $800 on a Credit One card (90 days late).
  • $350 to Duke Energy (not yet in collections).
  • $230 to Spectrum.
  • $300 in medical debt (already in collections).
  • $500 for an old car insurance policy (I helped my partner get a car).

So overall, I owe just under $10k (excluding the student loans). While that might not seem like much to some, it feels overwhelming to me. My credit used to be nearly 700 before my LTD denial, and I was never late on payments for years. Now, my credit is trashed, and it’s been really hard to deal with.

I’m considering bankruptcy to get a fresh start. If I file, I was thinking of using any LTD back pay I get to buy a cheap car instead of paying off the debt. I’d have to rebuild my credit after bankruptcy, but at least I’d be able to save and plan better. My partner doesn’t have a credit score, and her dad had to cosign for this apartment. My mom might be able to cosign if I really needed it.

I know I should probably talk to a financial expert, but I’d like to hear from others who’ve been through something similar. Should I go for bankruptcy, or try to pay off what I can if I get my disability payments?

I’m not sure bankruptcy is worth it for that amount of debt. You can only file once every 8 years, so if things get worse, you’re stuck. Plus, a bankruptcy lawyer can cost $2,000. Maybe let the debts charge off and try negotiating later.

That’s not enough debt to file bankruptcy for. You’ll tank your credit for seven years. Don’t do it.

Don’t pay those debts, especially if your disability income is safe. I’m not sure if it can be touched though.

Fin said:
Don’t pay those debts, especially if your disability income is safe. I’m not sure if it can be touched though.

Totally agree. Debt lawsuits probably wouldn’t be worth it for them. Where do you live? In my state, small incomes and disability are protected from garnishment.

@Cameron
I’ve heard of people getting sued for $1k of debt.

I agree with the others, $10k isn’t enough to file for bankruptcy. Have you tried transferring the debt to a 0% interest credit card?

Vince said:
I agree with the others, $10k isn’t enough to file for bankruptcy. Have you tried transferring the debt to a 0% interest credit card?

I think I tried before, but I didn’t qualify. I might give it another go.

@Phoenix
I recently moved $4k to a Bank of America card with a small fee for 18 months. They approved me for $12k.

Vince said:
@Phoenix
I recently moved $4k to a Bank of America card with a small fee for 18 months. They approved me for $12k.

Do they do a credit check for that? That would take a lot of stress off me if I could qualify.

@Phoenix
Yep, they’ll run a credit check. My credit score’s around 800, so I got approved.

No need for bankruptcy. Focus on paying the essential bills, and let the others go for now. You can work out a deal later.

Skyler said:
No need for bankruptcy. Focus on paying the essential bills, and let the others go for now. You can work out a deal later.

Could you explain what you mean by letting the others go and negotiating later?

Wait until your LTD case is settled. Right now, there’s nothing they can go after. Bankruptcy would just waste your money. SSDI is safe from garnishment too.

Keep fighting for your disability benefits, don’t lose hope.

Jalen said:
Keep fighting for your disability benefits, don’t lose hope.

Thank you, I’m doing my best to keep pushing forward.

Have you gotten a disability lawyer yet? If not, try consulting one. They typically work on contingency and get paid from your disability award.

Cam said:
Have you gotten a disability lawyer yet? If not, try consulting one. They typically work on contingency and get paid from your disability award.

I’ve been trying to find one since my LTD denial a month ago. It’s been tough, but I’m not giving up.

@Phoenix
Why are they turning you down? That seems odd. Usually, they only reject cases if they think you can’t win.

Tatum said:
@Phoenix
Why are they turning you down? That seems odd. Usually, they only reject cases if they think you can’t win.

Hold off on bankruptcy for now. SSDI can’t be taken, and I’m not sure about LTD. If you get disability benefits, it might not make sense to file. Talk to a bankruptcy lawyer for a free consultation just to see.