I Have Mental Health Issues. How Can I Reduce My Debt? – Mel


“Dear Steve,

I have a charged-off bank account, a charged-off cell phone bill, a charged-off credit card, and have not paid anything on another credit card for almost 6 months. The bank account received several overdraft charges that were a result of a cab company charging me $70 instead of $10, but I didn’t keep track of the receipt.

The cell phone bill was over $800 due to hours of international calls that a “friend” made without my permission. I tried to explain this to both the bank and the cell phone company, but they didn’t remove any charges. I started defaulting about a year ago, and within the last year I have: lost my job; become homeless/bounced back and forth between friends/relatives homes; failed out of graduate school; and have started exhibiting signs of serious mental illness.

I am now seeking psychological care and am arranging to move into a rehabilitation facility. I am not sure how much I owe total, but I believe it is between $8-10K. I want to close the accounts and negotiate some sort of debt settlement to sort this out. My credit score is horrific, and I couldn’t even see the score online when I requested it.

What do you suggest I say to the credit card companies, bank, and cell phone company to reduce my debt and stop being charged these 27% interest rates? Is there anything you suggest I do about the charge-offs?

Does my documented mental health deterioration have any bearing on my situation? I am brand new with the whole credit card and debt process, so any suggestions or guidance would be greatly appreciated!


Dear Mel,

It sounds like you’ve had a real rough time in the recent past. I’m so sorry to hear all that you’ve been through.

Let me cover some basic issues up-front.

Your mental illness is not a factor unless you can show that you were mentally incompetent at the time you entered the contracts that you owe on. Doubtful.

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As for the steep interest rates, the reason they are charging you those is because they can. They will.

Even though your wonderful friend made the calls on your phone, you are totally responsible for the charges. A cell phone is a liability like letting someone use a credit card in your name to buy whatever they want. If you let someone use your cell phone, you are on the hook for the charges.

Getting out of debt is best accomplished in a holistic manner, taking your current life into account. Based upon your growing mental illness and the need to focus on getting better and overcoming that, I would suggest that bankruptcy is the best solution for you, even with only $8,000 to $10,000 of debt.

Here’s why. Significant financial problems impact our mental health. More than 40% of people with money problems are clinically depressed and I have seen case after case of people that have been slowly slipping under mental health issues of all types while struggling with the debt and related stress. It doesn’t need to be that way.

Your life and recovery are not going to be better, faster or easier by remaining obligated for this debt you can’t pay while you are moving into a rehabilitation facility to try and get better.

If you feel like you need to repay your creditors latter for personal reasons, do it. But if you go bankrupt now you can do that on your terms and not operating in fear by being pressured by the creditors while you are trying to get better.

I would urge you to call a local bankruptcy attorney and go in and talk about what bankruptcy would mean for you. Take a friend with you to help you remember everything and to ask questions.

I don’t see bankruptcy for you as a sign of failure, but as a first and necessary step to help you have a better chance and opportunity to focus on your mental health issues and worries and have a better chance to recover from those.


You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

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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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2 thoughts on “I Have Mental Health Issues. How Can I Reduce My Debt? – Mel”

  1. My mom has struggled with mental illness for many, many years. Since I have only recently become old enough for her to talk about her financial problems, I have no idea how long my mom has been struggling with debt. Over the last two years she has been in and out of hospitals. Because she is unemployed and on disability due to her illness, the only health insurance she has is through Veterans Assistance. She recently had to give up her home to move in with her older sister who can help her maintain her mental health. However, she is constantly hounded by creditors and cannot pay back her mortgage. She has tried doing a short sale and everything, but nothing is working. I think she should file for bankruptcy, but she is worried that she won’t be able to qualify for an apartment, should things with her sister change. What should she do?

    • Chris,

      As it stands now your mom is in worse shape to qualify for an apartment with active collections. Due to her mental state and the situation, bankruptcy can be part of the healing process.

      If you can, help her to understand that bankruptcy in her situation is the application of a remedy to a bad situation and does not make her a bad person. If she feels very strongly about repaying people she owes, there is nothing that prevents her for repaying them after bankruptcy as she can afford to.

      By removing the stress and emotional trauma of the financial situation it gives her a better chance of dealing with the underlying mental health issues.

      Think about it like this. If she had a piece of shrapnel sticking out of her leg that was causing an infection, pulling it out would hurt, but that would be the right thing to do by a professional.

      And by the way, immediately after bankruptcy she might not be able to qualify at a big corporate apartment complex but I can assure you there is always a private landlord or small complex that will give her a chance. I just helped someone with no credit get approved by a complex. They had to pay three months in advance but they got approved. And no credit is worse than bad credit.

      Please keep me posted.

      Big hug.



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