Low Income Debt Relief: Government Assistance and Resources (2023)

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Debt is the extra weight you can't seem to shed. At best, it's uncomfortable and you feel it everywhere you go. At worst, the debt just keeps piling up, posing a serious threat to your financial health that requires an expert diagnosis before you can recover.

Once a diagnosis has been made, remedial action can come in many forms, from grants, educational and support resources, strengthening credit and debt relief programs.

Being in debt can be challenging for anyone, but it's especially daunting for low-income families.

People in low-income households worry daily about how to pay their monthly bills, as well as about things that come up unexpectedly, including this week's groceries or gas for the car. It's a paycheck existence without muchretirement planning,College Fund, savings account, or other long-term financial goal.

It's about survival, but that doesn't mean mounting debt, especially credit card debt, has to be the consequence.

What is considered low income?

If you're among the millions of Americans struggling to survive, you might think that "low income" is an understatement given the challenges you face. The term is technical when it comes to the federal government's debt relief programs available to consumers. The programs use a formula to define low-income households, as opposed to "poverty-level households."

The difference between the two can be the difference when it comes to getting help with debt and other financial challenges from government sources.

Household poverty levels, officially known as the Federal Poverty Guidelines, are based on the minimum income a family needs for food, clothing, transportation, shelter and other necessities.

A low-income household is a household whose taxable income was no more than 150% above the poverty line in the previous year.

In 2022, the federal poverty guideline for a single household in the contiguous 48 states was $13,590; So that means a low-income, single-person household would earn $20,385. Alaska and Hawaii have separate, higher policies due to the higher cost of living in those states.

The US Department of Health and Human Services (HHS) annually defines poverty guidelines based on income and household size. The charts below show what those numbers will be by 2022 and the resulting guidelines for low-income households in the 48 contiguous states of Alaska and Hawaii.

Poverty line and low income criteria in the 48 contiguous states and the District of Columbia

Household Size/Poverty Policy/Low Income Policy

For families/households larger than 8 people, add $4,720 for each additional person for Poverty Policy and $7,080 for Low Income Policy

Criteria for Low Income and Poverty Level in Alaska

Household Size/Poverty Policy/Low Income Policy

Hawaii poverty line and low income criteria

Household Size/Poverty Policy/Low Income Policy

For families/households larger than 8 people, add $5,430 for each additional person for poverty guideline; add $8,145 for low-income policies.

Am I eligible for government support for low earners?

The short answer: It depends.

The income figures in the charts above are based on poverty guidelines set by the US Census Bureau and are updated annually based on changes in the cost of living. Federal and state government programs use these guidelines depending on the program and the region in which you live.

If credit card debt is your biggest budgetary challenge, and that's true for many Americans, regardless of income, you won't find a federal debt relief program.

The good news is that there is no shortage of help on other fronts. Federal government debt relief programs in the form of grants include long-term programs such as the Supplemental Nutrition Assistance Program (SNAP, formerly known as Food Stamps), Temporary Assistance for Needy Families (TANF), Medicaid, Program Children's Health Insurance Program (CHIP), unemployment benefits, and more.

Most federal grants for low-income people are managed by HHS and the US Department of Housing and Urban Development (HUD). At the state level, resources and information are available from your state Department of Health. Local government in some states also has resources or information for things like paying emergency utility bills or exempting local property taxes for people in financial crises.

If your family is classified as low-income, you may qualify for HUD's public housing program, administered by state housing boards or agencies. To qualify for housing benefit, you must earn no more than 80% of your county or city median household income (your state housing department has tables of amounts on their website). If your household earns 50% of this median income, it meets HUD's lower income threshold.

There is an application process for HUD housing benefits and programs that includes proof of income. Visit your state Department of Human Services website for information on how to apply.

Disclaimer: Most government assistance programs are only available to US citizens or legal permanent residents of the United States. Undocumented immigrants are typically not eligible for these government programs.

Since the COVID-19 pandemic, more attention has been paid to low-income and poor Americans struggling to make ends meet, which means resources and information have become increasingly easier to find.

The number of people living in poverty in the US is rising after a four-year decline. The 2020 US Census found that 37.2 million people lived in poverty, up 3.3 million from 2019. COVID-19 assistance, particularly cash payments for families with children, temporarily lifted families out of poverty in late 2020 and 2021, as many studies have shown , but in 2022 indicators pointed to an increase in the poverty rate.

Are there any grants to pay off the debt?

Government and other assistance programs offer grants (money that does not have to be repaid) to help with living expenses and more for those who qualify. While there are no government grants for debt relief, there is free money to pay off debt as it will help you pay the bills and give you more income to pay off credit card and other debt.

The largest grant offered by the government may be housing vouchers for those who qualify. The local housing office pays the landlord directly. Other government programs that provide temporary and long-term financial help with bills include Low Income Home Energy Assistance Program (LIHEAP), Temporary Assistance for Needy Families (TANF), Special Supplemental Nutrition Program for Women, Infants and Children (WIC), Assistance paying off student loans and more. We'll take a closer look at them below, including how to find them.

Beware of offers to purchase listings from government grant programs. They are usually scammers. There is no government credit card program.debt reliefand legitimate debt relief and settlement programs are subject to strict rules.

Resources for Low-Income Families

Whether you're a single parent trying to feed and clothe your children, whether you're retired, underemployed or down on luck, living in poverty or low income is challenging. But there are dozens of resources at your disposal.

financial aid for training

Government and private funds can help with student loan debt. If you are still in school, your aid agency has resources. Otherwise:

Federal study grant— Part of the US Department of Education, has information about scholarships and financial aid. Some private funds for low-income students areQuestBridge,The Education Foundation,Bloomberg-PhilanthropenjFINE.

Food, shelter and health resources

Some organizations and programs that have resources and links for financial assistance:

• CuidadoDeSalud.gov(Information on cheaper health insurance rates)
• AARP(medical supplies and other resources)
• US Department of Agriculture Food and Nutrition Services(USDA-FNS)
• Health insurance
• National Low Income Housing Coalition Resource Library
• ShelterListings.org(Government Links to Homeless Shelters)

" Further: Help with rent payments

Utilities and Bills

If youYou can't pay your billsKeeping the lights on and heating and cooling the house is essential.

For information aboutHow to reduce your overhead costsjhelp pay utility bills, visitEnergie.govWeathering Assistance Program.

Energy assistance program for low-income households(LIHEAP) is a federal program that helps meet energy bills for low-income families.

Financial help for women and families

single parentthey can contribute to the challenges of a low-income household. Financial support for single parents is available from:

• WIC– Providing complementary foods and more for pregnant and low-income mothers and children up to 5 years of age.
• CHIP- The Children's Health Insurance Program provides affordable health insurance for children in families who make too much money to qualify for Medicaid.
• TANF– Bridging aid for needy families offers emergency aid for emergencies such as accommodation and food.

legal help

• NWLC— The National Center for Women's Rights has a Poverty and Income Support with resources for low-income families.
• Die Legal Services Corporation— A non-profit organization that provides low-cost civil legal aid to people on low incomes.
• The American Bar Association— Lists legal aid agencies and free (free) legal aid by state.

general financial support

Some states havegeneral utilitiesare run by local governments offering emergency financial assistance, check to see if yours is one of them.

Online resources that link to a variety of state, federal, and private services include:

• Need help paying bills
• beneficios.gov
• USA.gov
• Resource Guide for Seniors

How to pay off low income debt

When you're on a low income, you don't have much leeway to do anything other than pay the bills. But with a little hard work, you can maximize your money by setting and tracking financial goals.

The first step is to decide which debt relief option to choose. What are your goals? What resources can you use? What percentage of your budget do you spend on housing? For food? utilities? Transport?

If you're feeling overwhelmed, consider free nonprofit credit counseling like that offered by InCharge Debt Solutions. Advisors are professionals who can help you budget and discuss debt relief options.

Follow these steps to get your debt under control:

1. Track your expenses:Track how much you spend and where you go for 30 days. Online banking makes it easy. It's all on your statement if you use a debit card instead of cash. If you use cash, save your receipts, use an app, or jot it down in a notebook. You will be surprised how much you can reduce your monthly expenses.
2. Calculate your credit card debt:It's human nature to try to ignore how much debt you owe, but knowledge is power. Adding it all up and seeing what it costs each month is the first step to eliminating it. Divide the total by how much you can afford each month. For example, if you have $12,000 in credit card debt and can pay back $400 per month, it will take you about 2.5 years ($12,000 ÷ 400 per month = 30 months) to pay it off. This assumes you don't use the credit card.
3. Create a budget:It doesn't have to be complicated or scary. A budget keeps track of how much money is coming in each month, what your necessities are (apartment, utilities, car, credit card payments), what's left over, and where it's going. Your budget should be something that you review and adjust frequently and make sure you stick to.
4. Stop debt growth:If possible, stop using credit cards and do not open new ones.
5. Stay positive:Even if your budget slips, this is a decisive success factor.

Once you understand your debt, have a budget, and are following a monthly plan, try some of these tips to stay on track and even increase your income:

Debt Snowball:Pay off your smallest debt first, regardless of the interest rate. Financial experts like Dave Ramsey, who popularized this method, say that momentum (the snowball effect) can motivate you to keep paying down your debt.

Sell ​​some things:Neighborhood flea market, eBay, Craigslist, Facebook Marketplace, you name it. Get some cash for things you don't use and don't really need.

Earn extra income:If you can bring in an extra $50 or $100 a week, you'll be able to pay off your debt much faster. Consider becoming an Uber driver or a flexible Amazon delivery driver. Work a night at a bar, restaurant, or retail store. Make sure you research any additional work carefully to ensure it generates revenue instead of wasting your time. For example, Uber drivers can make a lot of money, or they can make $12 for a full day's work. Find something that will generate the extra income you need that works with your life, your resources and your schedule so it doesn't cost you money.

Reduce your expenses:Cut the cord, cancel those streaming subscriptions, cut back on trips to Starbucks or eat out. Since you've been tracking 30 days' spend, you know where to cut places, so now's the time to do it.

Create an emergency fund:Saving even $10-$25 a week for rainy days can help you avoid financial emergencies that can ruin your budget.

Credit Card Refinance:Cut the high interest rates on your credit cards and you'll have lower monthly payments. Transfer balances from multiple credit cards to a single lower-interest credit card, or consider some form ofdebt consolidation.

Find out more about debt relief:Debt management, debt consolidation loans, and debt settlement can eliminate credit card debt. Call a nonprofit credit counseling agency like InCharge Debt Solutions and let the experts walk you through the process to see if this is a faster and cheaper way to get out of debt.

Establishment and maintenance of credit

Maintaining good credit is key to financial stability. If you have credit card debt,improve your credit scoremaking payments on time and reducing balances should be a goal. If you don't have a credit history, establish one by applying for a business or low balance credit card. Use it sparingly and pay the balance monthly.

Management of collection agencies and fraudsters

People with debt and little money are the main targets for scammers.

IsFair Debt Collection Practices Act (FDCPA)establishes rules for collection agencies, including:

• How often and when can they call
• No abuse or fraud
• You must state the amount owed, the name of the current creditor, and the name of the original creditor.

IsThe Federal Trade Commission has more information..

Strict rules also apply to debt repayment companies. If they do any of these, it is adebt elimination scam:

• Collect fees before providing the service
• Encourage a "government" debt elimination program
• The "accompanying" credit card debt will be eliminated or paid for "cents on the dollar."

Long-term debt relief solutions

AndYour debt burden is too highFor you to see a way out, the best advice is free. Call a nonprofit credit counseling agency like InCharge Debt Solutions and let an expertCertified Credit Advisorwalk you through the long-term solutions available.

The goal of any advisor is to help you learn how to manage your money and regain control of your finances. They look at your income and expenses, and then review debt relief options so you can determine which ones work best for your situation.

If you need more than free advice, long-term debt relief options include:

debt management— This program reduces the interest rate and monthly payment on credit card debt to affordable levels. Consumers make a fixed monthly payment to the non-profit credit advice center, which then forwards this to the card companies in agreed amounts. It's a particularly attractive option for those trying itGet out of debt with bad credit. There is no credit requirement.

Debt Consolidation Loan— Consumers take out a loan and use it to pay off their credit cards. The loan must have a lower interest rate than what you pay with credit cards, but you must have good credit to qualify.

Profit-oriented debt regulation— In this program, consumers, or the for-profit companies they hire, attempt to pay off the debt by paying less than what is owed. Consumers make monthly payments into an escrow account. If there's enough money in the account, they (or the company they signed up with) make a flat rate offer to the credit card company. Card companies do not have to accept the offers. This takes a lot of negotiation and can end up costing you more than you should.

Credit card debt forgiven– It is offered by non-profit credit counseling agencies with the goal of paying less than you owe. The difference between credit card debt relief and debt settlement is that there is no negotiation. The loans liquidate 50%-60% of your debt in 36 fixed installments. There is no interest. Also known as the Less Than Full Balance Program, this is only offered by a few credit advisory agencies, including InCharge Debt Solutions.

Competition— This is the option if you're so far behind that you won't be able to pay your bills in five years or less. The good news is that a successful bankruptcy filing gives you a chance to start over with a clean slate.

Managing credit problems is challenging at the best of times, especially for low-income households and especially when it comes to debilitating credit card debt.

There's no easy way, but a nonprofit credit counseling service can help you find the right one.Best Debt Consolidation Programto you.