Paying off your credit card debt while collecting Social Security is undoubtedly a struggle, but it’s not impossible. Chances are you have more resources than you realize. The important thing is to take action because your debt will not go away on its own. The sooner you address the problem, the sooner you will dig your way out of debt.

Paying Off Debts When Collecting Social Security Income

• Determine your Budget

Whether you’re retired, or have a temporary or permanent disability, the first step to paying off credit card debt on a fixed income is to get a clear picture of your discretionary income.

How do you determine your discretionary income?

Make a list of all your monthly payments.

Subtract your total expenses from your monthly income.

That value is your discretionary income or the money remaining after you pay your bills.

• Assurances and Warnings

While creditors can seize your income to pay off debts such as taxes or federal student loans, credit card companies are generally prohibited from garnishing your Social Security or Veterans Affairs (VA) benefits. Note there are some exceptions, which you can read about further here on the Consumer Financial Protection Bureau’s website.

For example, Social Security money that is co-mingled with non-Social Security money could lose its special protection status. Meaning if your creditors obtain a judgment to garnish what they are owed, your bank may have to provide access to the funds in your accounts, even if the funds include Social Security money. For this reason, it’s best to avoid co-mingling your direct deposited Social Security benefits with other funds. Instead, consider establishing sub-accounts at your bank exclusively for your Social Security benefits. Make sure that only your Social Security money is deposited in the account.

• Can you Earn More?

If you’re struggling to pay off your debt on a fixed income, your first instinct might be to earn more money. And, for many people, this is precisely the right thing to do. However, if you are collecting Social Security, an additional income source might jeopardize your benefits.

For example, if you receive Social Security benefits before reaching full retirement age, your payment will be reduced if you have an additional income source generating more than $1,300 per month.

The good news is that once you pass the full retirement age, your benefits will not be reduced regardless of how much you earn. Even a few hundred additional dollars per month can be put to good use.

Selling some assets can provide a quick win for some people. The immediate cash can give a boost of momentum and make a dent in the amount owed. However, eventually, the number of items one can sell online or through a yard sale will run dry.

• Proceed with Caution

A word of warning: In order to receive Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits, you must be physically unable to work. Therefore, earning additional income through a job or your own business may put your eligibility for these benefits at risk.

Why does that matter? If you lose your benefits, it can be a long, arduous process to get them restarted. So, if you’re considering supplementing your income through a job or starting a business, consider consulting with a disability attorney first.

Should you get the go-ahead to supplement your income, some potential jobs that typically only require a reliable internet connection, telephone and computer include:

• Telephone sales
• Teaching English online
• Freelance writing
• Starting a blog or website that you can eventually monetize

• Try to Pay Less in Interest

High-interest rates are often what trap people in a cycle of debt. A single missed payment may cause your interest rate to skyrocket up to 29.99 percent. Soon, you’ll find your payments barely cover the interest fees. Negotiating an adjusted interest rate can go a long way to paying down your balance.

Prepare to call each of your creditors and ask to speak with a specialist who handles the hardship repayment program. It sounds intimidating, but many creditors are willing to work with consumers. In fact, creditors are oftentimes willing to arrange for smaller monthly payments in lieu of suing you and seeking a judgment.

Before you call a creditor, develop a plan that includes a brief summary of your financial situation and a proposed payment plan you can stick with. Be sure to follow up with your creditors by mailing copies of your benefits statement, a budget worksheet or other similar paperwork.

Communicating with your creditors throughout this process is essential. By sharing detailed information about your financial situation, you may offset legal actions they may have planned to take against you in the future. Documenting your interactions with your creditors is also key. Be sure to keep a log of every call and every person you speak with.

Other Options to Consider

Homeowners on fixed incomes sometimes take out a home equity line of credit or a reverse mortgage to pay off credit card bills. This is not ideal, as it just moves the debt from one place to another. But if you can put your cards on figurative (or literal) ice after paying them off, and your new interest rate is favorable, this may be a viable option.

Some people ultimately choose just to stop paying their credit card bills, but that’s almost never a good idea. While creditors may not garnish your benefits or take your home, there are still many resources available to them to try and get what they are owed. Typically, they will not stop until someone intervenes, usually a lawyer or a credit counseling organization.

For others, a debt management program through an accredited credit counseling agency, like DebtWave, will be able to help you pay off your debt.

Are you struggling to pay off credit card debt while on a fixed income? Share your story in the comments below!