Disabled and in debt: Three choices

Living off of $675 a month isn't easy, especially when carrying card debt

By Sally Herigstad

To Her Credit

Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also writes regularly for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Steward Radio and other programs. See her website SallyHerigstad.com for more personal finance tips and free budgeting worksheets. Ask Sally a question, or read her previous answers in the To Her Credit archive

Dear To Her Credit,
I am 57 years old and on disability benefits. I receive $675 to live on each month. I've had to use my credit card for medical and car repairs, and this bill has put a real strain on me with a payment of about $135 a month on a balance of about $5,800.

If I just quit making payments, could they take my home from me, since the bill will continue to incur interest and late payments? I do not have a mortgage on my home and that's the only way I can live in my home. If I had to leave, I would be homeless. I couldn't even afford an apartment and electricity on my $675 a month. I live in Florida, and I am curious what the repercussions would be if I quit paying the card.

Thank you again. I have no family and no one else to ask these questions of. Take care and God bless. -- Stacey

Dear Stacey,
You can stop worrying about the credit card company forcing you to sell your home. If you stop paying your bill, the amount you owe will grow exponentially as fees and interest are added, and eventually, the issuer can go to court and get a lien on your home and your other assets. But creditors generally have to wait until you sell something to collect their money -- you won't be kicked out of your house.

 That doesn't mean simply not paying your credit card bill is a good idea.

Let's say you stop making credit card payments tomorrow. First, a person can't help but feel there's something wrong with that if there are other alternatives. After all, a credit card account holder promises to pay when they open the account, and again every time they sign on the line for goods or services. The credit card company pays the merchants, doctors, and so on. If they don't get paid, the system doesn't work.

You'll start getting calls, letters and even e-mails from the collections department. The late fees and interest will start racking up, and if it goes to court, you'll be hit with legal fees as well. That $5,800 bill could double or triple. Your credit score will tank, so you won't be able to get more credit. Then, what will you do next time you need to pay for car repairs or other bills?

Besides, the problem is not the $5,800 you owe the credit card company. The real problem is that you don't have enough monthly income to cover basic living expenses. Your credit card bill could magically disappear overnight, and you still wouldn't have enough money.

You must find a way to increase your monthly income. It shouldn't be hard to come up with more than the $675 you receive on disability. You have two possible sources of income: earning it or making use of your home.

If you are disabled and can no longer do the work you used to, that doesn't mean you can't do anything. You can type, and you have access to the Internet. People have started businesses with less.

Chellie Campbell, author of "The Wealthy Spirit," tells about a woman she met who owned a very successful employment agency. Campbell says, "When I asked her how she got started, she said she was in a serious car accident and was hospitalized for almost a year. She was her own sole support, and she said she had to find a way to make a living from her hospital bed. Immobilized, she couldn't move anything but her mouth, so she said to herself, 'Well, I can talk on the phone so I'll do telephone sales.' And that's how she started her business."

If she could start a business in that situation, almost anyone can. Look at your skills and experience and find something other people might pay you for. It can be a job, but don't stop there. Starting a business is a great idea for people with disabilities. You can choose your hours and the kind of work you can handle. You could buy and sell things online, take care of people's pets when they are on vacation or tutor in math, English or another subject you are good at.

With Skype making it so easy to talk and see people at the same time, lots of new possibilities open up. People can give music or computer lessons to anyone, anywhere, without leaving their living rooms.

If you need to brush up your skills, you can do so without a big investment in money. Campbell says, "Take classes, read books, listen to tapes (available at the library free!) and get a mentor or partner in the business who knows more than you. Join or start a mastermind group of friends who can help and support you and each other." You can also read Campbell's newsletter at chellie.com.

 If your disability makes it impossible for you to earn money, you have no choice but to look to your house for income. You might be able to take a roommate or rent out a room. You could take out a reverse mortgage that pays you a monthly income. Or you could sell your house. I'd hate to see you do that, however, because your paid-for house is the best thing you have going for you financially right now.

Campbell says, "It is only your will and determination to succeed that will keep you going. You determine what you want to happen and you dedicate yourself to doing whatever it takes to make that happen." She's right. As hard as it is to be 57 years old and disabled, I know you can find a way to improve your life. Good luck, and never give up!

See related: Don't let a disability ruin your credit, Extreme ways to tackle debt, Over your head in debt? 5 extreme budgeting ideas

Gary Foreman, "New Frugal You"

Sally Herigstad, "To Her Credit"

Cathleen McCarthy, "Cashing In"

Jane McNamara, "Let's Talk Credit"

Elaine Pofeldt, "Your Business Credit"

Erica Sandberg, "Opening Credits"

Published: March 11, 2011

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