Credit card debt is difficult enough, and for the many Americans who've experienced a debilitating disability, covering their obligations can be especially challenging.

In fact, one in four Americans lives with a disability and the financial complications that accompany it.

Unfortunately, no federal relief program explicitly offers credit card debt forgiveness for disabled Americans. And although general debt forgiveness programs do exist, they come with a cost.

The good news is those with disabilities are eligible for additional protection in certain circumstances.

Over the next few minutes, you’ll learn what these protections are and whether they apply to your situation. Make sure you read to the end to understand what resources and alternative solutions are available.

Credit card debt forgiveness

With debt forgiveness, a creditor agrees to cancel part or all of a borrower's debt. Although it can offer a lifeline, it’s a complex process with significant financial and legal implications, so it shouldn’t be pursued lightly.

Here are some of the most important things to consider with credit card debt forgiveness for disabled Americans:

  • Tax implications: Forgiven debt might be deemed taxable income in certain jurisdictions. For example, if you had $20,000 worth of debt forgiven, you’re taxable income for the year would be effectively the same had you earned an additional $20k through your salary.
  • Credit score impact: Debt forgiveness can substantially impact your credit score. All else equal, lenders prefer to avoid borrowers who’ve had debt forgiven. It’s a red flag that tells lenders you might not be able to fulfill your obligation under the loan.
  • Accessibility: Debt forgiveness programs are typically limited in their availability and often come with strict eligibility criteria, like working in a particular sector.

Is debt forgiveness the same as debt settlement?

Essentially yes. In practice, however, debt settlement usually refers to a creditor forgiving a portion of your debt rather than the entire amount.

Is you cancelled debt taxable?

In the United States, when $600 or more in debt is canceled (i.e., forgiven or settled), debtors are given Form 1099-C, “Cancellation of Debt,” by the creditor.

This tax form is intended to report the debt cancellation to the Internal Revenue Service (IRS).

This amount is generally considered taxable income by the IRS. As a result, debtors need to report Form 1099-C total on their federal tax returns.

Judgment proof

Being labeled “judgment proof” means that even if you’re sued, creditors cannot enforce the judgment through, for example, wage garnishment. Put simply, it means you’re immune from judgment.

Why might one be considered judgment-proof? Here are some common reasons:

  • Low income: Your salary is protected from garnishment if you earn below a certain threshold.
  • Insufficient assets: If your assets are below a certain level, they are exempt from collection. Moreover, some assets, regardless of value, are legally exempt.
  • Bankruptcy: Assets discharged via bankruptcy can protect a debtor from collections.
  • Legal protection: In rare cases, possessing a particular status, like active-duty military personnel, may afford you additional legal protection.
  • Exempt income and assets: Disability benefits, social security benefits, and other government payments may be exempt.
  • Protected assets: Trusts and other legal structures can shield assets from collection.
  • Joint ownership: Owning a property with someone else may defend the asset from being used to fulfill the debt obligation.

Nonprofit debt relief resources for the disabled

Consulting with a financial professional can be an effective way to determine your best option.

From credit counseling to legal services to educational resources, numerous nonprofits operate in the United States, focusing on those with a disability.

  • InChargeInCharge provides professional credit counseling, debt management, and debt relief services for those struggling with unsecured debt, including disabled ones
  • HELPS law firm: Provides legal representation for disabled persons, senior citizens, retired individuals, and veterans facing debt collection
  • National Disability Institute: Offers assistance and resources to help those with disabilities through challenging economic periods

Other debt relief solutions

Debt forgiveness is just one of the solutions you have at your disposal. Before deciding on your next step, consider if any of the following are suitable options.

Do it yourself (DIY) debt relief

If debt forgiveness is an option, consider whether a DIY approach can help solve your debt challenges. For many, it’s the first place they start before escalating to using professional services.

  • Budgeting: By tracking your revenue and expenses, you can better assess where your money flows to and from. Armed with this knowledge, you can make more informed decisions about your finances, ultimately helping resolve your debt issues faster.
  • Debt snowball method: Some people are moved by momentum. If psychological tricks work for you, consider the debt snowball method. Using this approach, you tackle your smaller debt obligations first. The reason? To build momentum by seeing debts disappear and increase the likelihood of a successful resolution.
  • Balance transfers: This approach entails transferring your existing credit card balances to a new card with a lower rate. Credit card issuers sometimes offer favorable introductory rates as low as 0% for up to 18 months. This can provide a huge opportunity to significantly dent your credit card debt.

Debt counseling

Debt or credit counseling is a service offered to help borrowers deep in debt. Typically, debt counseling providers offer the following services:

  • Assisting debtors to formulate a budget
  • Provide money management advice
  • Deliver educational resources
  • Negotiate directly with your creditor to help secure a lower interest rate on your debt

Debt consolidation

Balance transfers described above are a form of consolidation; however, it can also occur with other forms of debt, like personal loans.

Consolidation involves merging multiple existing debts into a single new loan. Typically, the new loan will have a lower interest rate than the average of the current obligations.

Debt consolidation may be done with the help of a bank, credit union, or debt services company.


In extreme situations, disabled individuals may need to consider bankruptcy. This should be viewed as an option of last resort and needs to be fully understood before embarking on this path.

Bankruptcy is a legal process where a borrower obtains partial or full relief of their debts. While it can be the best option for some people, it comes with costs, like a severe and sustained hit to your credit score.

Next steps

Dealing with a disability is challenging enough before adding complications around mounting debt. So, it might be best to consult with a financial professional.

A professional working in your corner can help protect your assets and develop an effective strategy for dealing with your credit card debt.