I’m On a Fixed Income. What is the Best Way to Deal With My Debt?


Dear Steve,

I am an 80 yr old retired man on a fixed income. Previously I owed credit debt of about 17000 but took some savings and reduced it to about 11500. My credit score is about 780.I am getting letters from settlement companies and wonder if I should settle this debt with chase for a lesser amount.One negative is any money I save I would have to report as income on my taxes. The apr on the debt is 4 %.

What do you suggest?

What is the best way to dispose of this debt considering my age?



Dear Harvey,

Without a doubt the least expensive and best way would be for you to consider either bankruptcy or ignoring it and letting it default.

Let me explain, unless you have enough money saved and available for you to take care of yourself safely, draining assets to repay debt at this point might make emotional sense, but not logical sense.

Considering the fact you say you are living on a fixed income that tells me your resources may be limited. If so, then we need to do what we can to make sure you can shelter yourself, stay environmentally comfortable, have enough to eat and be able to afford medical care and medications.

If you decide to pursue bankruptcy as a way to legally clear the unmanageable debt the amount of debt forgiven would be tax free. As you noted, if you settle then if you are not insolvent after you settle, you will pay income tax on the forgiven debt.

Additionally, the funds to settle the debt may be better used for your future care than resolving the debt.

If you just look at the math, settling the debt may cost you $6,000 but for less than $2,000 you can probably find a local bankruptcy attorney to eliminate your debt completely.

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If you’d like to learn a lot more about bankruptcy, then click here and read all my posts about bankruptcy.

Depending on your asset situation, if your available assets are only from benefits, you may be judgment proof. That means when you default, collectors will call, you may be sued, but they can’t take money from you. I’m not a fan of that approach. I’d much prefer to see you close the door on the debt with bankruptcy than remain worried and hounded.


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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Damon Day - Pro Debt Coach

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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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1 thought on “I’m On a Fixed Income. What is the Best Way to Deal With My Debt?”

  1. Sir,

    I agree with Steve here. As a retiree myself, I live on near poverty level income. I just filed and was awarded a discharge of some significant debt by filing bankruptcy.

    In fact, I have filed a total of three (3) chapter 7 bankruptcies in my 68 years due to some extraneous circumstances. I used a lawyer only one of those 3 times. Doing a chapter 7 personal (consumer) bankruptcy is fairly simple. And most bankruptcy courts will be more helpful than not. They will tell you that they cannot provide legal advice, but they will tell you if you have all the information and forms in the correct format.

    I also recently assisted a friend complete her chapter 7 and hers as well as all of mine went through very smoothly. The best thing you can do is research doing a pro se (sans attorney) consumer bankruptcy. Here in Virginia they just made it easier for pro se filing. Perhaps your court has done so as well? Good luck.


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