Thinking about bankruptcy with under 10k debt while being disabled

Bankruptcy
1

I’m disabled and can’t work. I’m in the middle of an appeal for Long-Term Disability (LTD) after being denied once. If I win, I expect around $5,000 in back pay and $1,500 a month. I also applied for government disability, but got denied there too, and I’m appealing that as well.

Right now, I earn about $300 a month tutoring online, which is barely enough to help with bills. I don’t have a car, and I can’t afford payments for one either.

I live with my partner, who’s been very supportive. She’s not asking me to help with rent because of my income situation, but I try to cover utilities and food with what I make. She has a car, so getting one for myself isn’t urgent but something I’d like.

Here’s what I owe:

  • $30k in student loans (currently being reviewed for discharge due to disability).
  • $6,500 on a Discover credit card (60 days behind).
  • $800 on a Credit One card (90 days behind).
  • $350 to Duke Energy (not in collections yet).
  • $230 to Spectrum.
  • $300 in medical debt (in collections).
  • $500 on an old car insurance policy I helped my partner with.

So in total, I owe less than $10k (not counting student loans). While it’s not a huge amount, it still feels overwhelming. Before my LTD denial, my credit was nearly 700, and I kept up with everything for three years. Now, my credit is wrecked, and it’s been hard to deal with emotionally.

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

I know I should talk to a financial expert, but I’d love to hear what others in similar situations have done. Should I file for bankruptcy or try to pay off what I can if I get disability payments?

2

I’m not sure filing for bankruptcy is worth it for that small amount of debt. You only get to file once every 8 years, so if things get worse, you won’t be able to use that option again for a while. Plus, bankruptcy lawyers can charge around $2,000. Maybe you should let the debts go and try to negotiate settlements later.

3

That’s not enough debt to go bankrupt over. It’ll ruin your credit for seven years. Don’t do it.

4

Don’t pay those debts, especially if your disability money can’t be taken. I’m not sure if it can be, though.

5

Fox said:
Don’t pay those debts, especially if your disability money can’t be taken. I’m not sure if it can be, though.

Agreed, the companies won’t gain much from suing over small debts. Where do you live? In my state, disability payments and small incomes can’t be garnished.

6

@Lior
I’ve heard of people being sued for as little as $1k.

7

Yeah, $10k isn’t worth filing for bankruptcy. Can you move the debt to a 0% interest credit card for a while?

8

Alix said:
Yeah, $10k isn’t worth filing for bankruptcy. Can you move the debt to a 0% interest credit card for a while?

I tried looking into that before, but I don’t think I qualified. Maybe I’ll check again.

9

@Ari
It might be worth it. I moved $4k to a Bank of America card with a 3% fee for 18 months, but they approved me for $12k.

10

Alix said:
@Ari
It might be worth it. I moved $4k to a Bank of America card with a 3% fee for 18 months, but they approved me for $12k.

Do they do a credit check for that? It sounds like it could really help if I can qualify.

11

@Ari
Yes, they’ll check your credit. Mine’s 800, so it worked out for me.

12

Skip bankruptcy. Focus on paying the bills that are most important and stop paying the rest. You can try to negotiate later.

13

Mars said:
Skip bankruptcy. Focus on paying the bills that are most important and stop paying the rest. You can try to negotiate later.

Can you explain more about how to do that?

14

Wait until your LTD is decided. Right now, you don’t have any assets for them to go after. Bankruptcy would be a waste. SSDI can’t be garnished, so they won’t get anything from you.

15

Don’t give up on the disability process. Keep at it.

16

Grayson said:
Don’t give up on the disability process. Keep at it.

Thanks for the encouragement. I’m doing everything I can.

17

Do you have a disability lawyer yet? If not, consult one. They work on contingency and can take part of your disability award.

18

Keir said:
Do you have a disability lawyer yet? If not, consult one. They work on contingency and can take part of your disability award.

I’ve been trying to find one since my LTD denial about a month ago, but no luck yet. Still pushing to find one though.

19

@Ari
Why won’t they take you on? That’s concerning. Disability lawyers usually only turn down cases if they think it’s unlikely to win.

20

Denver said:
@Ari
Why won’t they take you on? That’s concerning. Disability lawyers usually only turn down cases if they think it’s unlikely to win.

I wouldn’t file for bankruptcy yet. SSDI is protected from judgments. Not sure about LTD, but if you get disability, bankruptcy might not be necessary. A free consultation with a bankruptcy lawyer could help.