Beating Credit Card Debt Collectors When Disabled

If you are disabled for the remainder of your life and unable to pay your credit card bills, learning how the collection industry works can help you beat them at their own game.

Your Social Security Disability benefits are safe from wage garnishment. However, a creditor could file a lawsuit to place a lien against personal property such as your house, car, checking, savings, investment, and IRA accounts.

Making yourself judgment-resistant is a more reliable way to negotiate debt forgiveness from a credit card company. They stop trying because the expected costs exceed the benefits of legal action.

Credit Card Debt Collection & Disability

Individuals with permanent disabilities enjoy some legal protections from credit card debt collectors. However, you cannot assume that you are automatically judgment-proof if the agency takes you to court.

Take proactive steps before a creditor files a lawsuit by learning how the industry prioritizes accounts and prepare to protect your resources.

Credit Scores

A brief primer on how debt collectors use credit scores can help people with long-term disabilities understand how the industry thinks. “Knowing your enemy” can help you prepare. Lenders use the well-known FICO and Vantage scores to predict the likelihood of future default when making an underwriting decision. However, once a delinquent customer, collectors use a different equation unfamiliar to the public.

Debt collection credit scores prioritize consumers based on the value of a successful lawsuit. Agencies invest money in the legal process and want to predict the likely return. These factors make for a profitable target.

  • The address is a real physical location (not a PO Box)
  • Current payments on other accounts indicate a source of income
  • Mortgage trade lines hint at possible home equity
  • Auto loan accounts suggest a car with Blue Book value

In other words, the credit scores reveal that collection agencies will pursue you aggressively in court if you have wages worth garnishing or if you have sufficient equity in your home or car. Likewise, they will ignore you if the opposite is true and write off the obligation.

Wage Garnishment

Keep in mind that a credit card debt collector cannot file a lawsuit to garnish Social Security disability benefits. [1] However, related rules vary between the two programs, which could impact the value of property liens.


Supplemental Security Income (SSI) checks are immune from wage garnishment for any reason. However, the $2,000 resource limits do not make you judgment-proof. Some assets do not count towards the total no matter how much they are worth.[2]

Cash, stocks, bondsHouse you live in
Bank accountsOne vehicle
LandBurial plots


Social Security Disability Insurance (SSDI) deposits are safe from wage garnishment associated with private debts but open for other government obligations.

  • Income taxes owed to the IRS
  • Federal student loans
  • Back child support payments

Property Liens

Property liens are where some individuals with permanent disabilities face the most significant threat from credit card debt collectors. A lien is a legal right to take possession of a property until the owner discharges an obligation.

SSI and SSDI recipients could be targets in a lawsuit if they have significant assets held in bank accounts, homes, or their cars.

Bank Accounts

Debt collectors can seize money held in bank accounts after winning a lawsuit. A judgment could include a lien against funds held in specific checking, savings, investment, and IRA accounts.

Therefore, Social Security disability recipients should establish a dedicated account for receipt of the checks. A separate bucket avoids comingling (mixing) the protected and unprotected money and makes for a more vigorous legal defense.

House or Car

Debt collectors can also place a lien against your home or car. Both SSDI and SSI recipients face this legal threat because these assets do not count towards the resource limits regardless of their value.

However, you do not feel the sting of a lien until the time comes to sell. The sale-based timing for when the creditor finally gets their money suggests two opposite reasons to hold onto your property.

  • Real estate tends to appreciate over time. Therefore, stay in your house as long as possible to delay the inevitable. Also, give the value time to grow so you can take cash out after closing.
  • Automobiles usually depreciate as they age. Therefore, keep driving your car and adding mileage to the odometer until its price approaches zero.

Credit Card Debt Forgiveness & Disability

Obtaining credit card debt forgiveness will not be easy for people with permanent disabilities. While being unable to perform your regular work duties is unfortunate, you still have a legal obligation to repay what you owe to private lenders.

Start by filing an insurance claim (if you have the coverage), then look at ways to make yourself judgment-resistant. Hardship programs offer modest help at best, while only the federal government will let you off the hook if you still owe money for your college education.


Credit card disability insurance is the first place to look for possible debt forgiveness. These policies will cover at least the minimum payment for a set period. Of course, you must sign up for this coverage before suffering an injury or contracting an illness that prevents you from working long-term.

Many people elect these extra perks and forget they even have them. Therefore, search the last eighteen months of statements looking for disability insurance transactions billed to your credit card. Also, contact the issuing bank to inquire if you have this coverage in force.

If so, file a claim with the insurance company.


Judgment-proofing your case is a strategy where people with permanent disabilities could convince banks to show mercy. In this case, the credit card debt collectors give up trying because costs would exceed any money they might recoup.

Of course, the tactics vary before and after a possible lawsuit. The information available to collectors changes during the process.

IncomeWild GuessExact
Auto EquityClose GuessExact
Home EquityCloser GuessExact
Checking & SavingsN/AExact
Stocks & BondsN/AExact
IRA FundsN/AExact


Having the appearance of a judgment-proof case can stop a lawsuit from happening in the first place. Your consumer credit report is the primary source of financial information available to collectors at this stage.

The collections scores based on your consumer report (see above) lean on an unreliable proxy for income. Meanwhile, the original amount minus the current balance on your mortgage and auto loan yields a reasonable estimate for the equity in your home and car.

Therefore, communicate with the collection agency that you are a Social Security Disability recipient. If your case is marginal because of unpaid medical bills or little property equity, the inability to garnish wages could cause them not to invest in future legal action.


The court may decide that you have a judgment-proof case after a successful lawsuit if your assets are insufficient to satisfy your obligations. During the discovery process, the creditor gains the legal right to examine other financial statements (bank, investment, and IRA accounts) they did not have access to before.

Of course, Social Security Disability recipients could still hold significant assets. In this case, the time value of money could diminish the monetary worth of a lien against your property. A dollar collected today has far more value than a buck recovered later.

  • Money held in checking, savings, investment, or IRA account lines the coffers of the creditor right away
  • Funds recovered when you sell your house means the collector could wait decades to reap their reward

Consider prepaying your mortgage using liquid funds in bank and investment accounts. The lower time value of money makes your legal case more judgment-resistant.

Hardship Programs

Credit card hardship programs are a popular place to turn for debt relief immediately after you become disabled. Contact the issuing bank to see what help they offer to people dealing with lost income due to unexpected medical events.

Hardship programs are unlikely to absolve your obligations. However, the bank could waive late fees and excessive interest charges, and refer you to local entities that can help you manage your bills and follow a budget.[3]

Communicating with your creditors is critical when dealing with financial adversity.

Student Loans

Individuals rarely get credit card debt forgiveness from private banks. But federal student loans work differently and can release much of the financial pressure you are feeling.  A total and permanent disability (TPD) discharge relieves you from having to repay certain student loan obligations.[4]

  1. William D. Ford Federal Direct Loans
  2. Federal Family Education Loans (FFEL)
  3. Federal Perkins Loans
  4. TEACH Grant Service Obligations

A discharge means the cancellation of your commitment to repay some or all of the remaining amount owed. You can show that you qualify by providing documentation from one of three sources:

  1. Department of Veterans Affairs (VA)
  2. Social Security Administration (SSA)
  3. A licensed physician

[1] Perkins Studdard, LLC

[2] SSI Spotlight on Resources

[3] Discover Hardship Program

[4] US Department of Education