How to Get Out of Debt on a Low Income

Does This Sound Familiar?

You check your bank account, and there’s barely enough to get through the week. Living on a low income sucks.

Another bill comes, and your stomach drops. You stop answering unknown calls—because you already know it’s a debt collector. Every paycheck disappears the moment you get it. You lie awake at night, feeling sick, wondering if you’ll ever get ahead.

If that’s you, you’re not alone. Millions of people are barely making it. You are not failing. The system is failing you. Debt isn’t a personal failing—it’s what happens when wages stay low, prices rise, and emergencies wipe out what little you’ve saved.

Right now, your first goal isn’t debt payoff. It’s survival.

First, Let’s Get One Thing Straight: Saving Comes Before Debt Payments

Most financial advice assumes you have extra money. You don’t. If you’re barely making it, throwing every extra dollar at debt is dangerous.

What happens when your car breaks down? When you get sick? If you have nothing saved, you’ll go right back into debt.

The Plan (That Actually Works When You’re on a Low Income)

1. Create Breathing Room First
   • Pause debt repayment (except essentials like rent, utilities, and food).
   • Save at least $500 as fast as possible—this tiny cushion keeps you from spiraling further.
   • Stop using high-interest credit (if possible).
2. Make the Calls That Give You Immediate Relief
   • Call utility companies and ask about hardship programs (they often reduce or pause bills).
   • Ask hospitals about financial assistance—nonprofit hospitals are legally required to help low-income patients.
   • See if you qualify for government benefits (SNAP, Medicaid, housing aid, etc.). Many people assume they won’t—but you might be surprised.
3. Get Your Essentials on Lock
   • Rent, food, utilities, and healthcare come first.
   • Credit cards and debt collectors? They can wait.
4. Decide if Bankruptcy is Your Best Option
   • If debt is crushing you and you have no realistic way out, bankruptcy isn’t failure—it’s a tool.
   • Billionaires use it to reset their finances—so can you.
   • If you qualify, you may be able to wipe out most of your debt and get a fresh start.

🛑 Do This Today to Reduce Panic

Right now, before doing anything else, take these small steps:

✅ Find out if you qualify for assistance: Use Benefits.gov to check for food, housing, or medical help.

✅ Call your utility company: Ask about a hardship program—they might lower your bill or delay payment.

✅ Sort your bills: Put rent, food, and utilities first. Let go of the guilt about not paying everything right now.

✅ Open the scariest bill: Just look at the number. Knowing what you owe is better than the fear of the unknown.

✅ Breathe. You’re taking action. That’s what matters.

Step 1: Why Saving $500 Matters More Than Paying Off Debt

Most debt advice says to “pay extra” toward your balances. But if you’re on a low income, you need a safety net first.

💡 Here’s why:

• If you have $500 saved, you can cover a car repair or medical copay without borrowing more.
• Without savings, you’re one emergency away from sinking deeper.
• Creditors can wait—your survival can’t.

How to Save $500 (Even If You Have Nothing)

• Side hustle fast (Uber Eats, babysitting, selling stuff, odd jobs—cash in hand = buffer against disaster).
• Use government assistance (SNAP frees up grocery money so you can save elsewhere).
• Pause unnecessary debt payments (credit cards will survive—your stability matters more).

Once you have this emergency fund, you have leverage. You won’t panic when the car breaks down. You won’t have to borrow just to buy food. Then, and only then, do you worry about debt.

Step 2: Debt Prioritization (A Survivalist Approach)

You can’t pay everything—so you need a strategy.

✅ Pay These First:

• Rent & Utilities (keeps you housed)
• Food (keeps you going)
• Transportation (so you can work)
• Medical needs (health comes first)

🚫 These Can Wait (Or Be Handled Differently):

• Credit cards: No, missing a payment won’t ruin your life. You can negotiate later.
• Medical debt: Many bills can be reduced or forgiven—call the provider and ask.
• Debt collectors: They can’t take your home, food, or essentials. Focus on surviving first.

Step 3: The Bankruptcy Question—Is It Time to Press Reset?

If you’ve been living in financial survival mode for years, it may be time to stop limping along and start fresh.

💡 Here’s when bankruptcy makes sense:

• You have no realistic way to repay your debt.
• You can barely afford basics, let alone extra payments.
• Your stress level is affecting your health.

What Bankruptcy Can Wipe Out:

✅ Credit card debt
✅ Medical bills
✅ Personal loans
✅ Old collections
✅ Past-due utility bills
✅ Certain tax debts (more on this below)
✅ Some student loans (if you prove undue hardship)

What It Might Not Wipe Out (But There Are Exceptions!):

❌ Most student loans—unless you can prove “undue hardship”

• But wait! Courts are increasingly granting student loan discharges in bankruptcy.
• If you can show repayment would cause extreme financial hardship, you can have them forgiven.
• Some cases are automatically reviewed now—so it’s worth exploring.

❌ Some tax debts—unless they meet certain criteria

• Income tax debts can be erased if:
  ✅ They’re at least 3 years old
  ✅ You filed the tax return at least 2 years ago
  ✅ The IRS assessed the debt at least 240 days ago
• If you have recent tax debt, bankruptcy might not help—but old tax debts could qualify.

🔹 Worried about the cost? You might qualify for reduced fees.

• Filing fees can sometimes be waived if your income is low.
• Many legal aid groups help for free (Find help here).

🔹 What about my credit score?

• It will drop, but if you’re behind on bills, it’s probably low already.
• Bankruptcy stops collections instantly, giving you room to rebuild.

🔹 Who should NOT file?

• If you only have debts that bankruptcy won’t eliminate (like recent tax debt or court fines).
• If you just need a little more time and can manage your payments with adjustments.

💡 Bottom Line: If you’re barely surviving and see no way out, bankruptcy can be the smartest, fastest path to financial stability. It’s not failure. It’s a financial tool—just like billionaires use.

Final Words: You Are Not Alone, and You Are Not Stuck Forever

I know this feels impossible. I know you might feel like you’re drowning. But listen to me:

You are not broken. The system is broken.

This is not your fault, but you have the power to change your future.

🔹 Start small—save a tiny emergency fund.
🔹 Make the calls that give you breathing room.
🔹 If debt is keeping you trapped, bankruptcy is an option.

One day, you will wake up and realize money stress doesn’t control you anymore. You will breathe easier. You will have choices.

And you deserve that freedom.

➡️ What’s the biggest thing holding you back right now? Drop a comment below—let’s talk. And before you go, boop that like button, subscribe and check out more free resources to help you break free.

Steve Rhode Debt Coach and Author

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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