Here's a sad but commonplace scenario. A long-time worker has a medical condition that has worsened to the point that he can no longer do his job, or, realistically, any other job. He applies for Social Security disability benefits. After several months, he's denied. He appeals, waits several months for a reconsideration review, is denied, and then and waits a year and a half for an appeal hearing. After the hearing has been held, it is weeks before he receives the judge's decision and then several months more before benefits are made available. All told, he waited over three years to get benefits. During that time, he lost his medical insurance and his house, and had to sell many of his belongings.
Fortunately, almost everyone who ends up getting approved for disability benefits will get a large back-payment check when their benefits finally start. SSI recipients can get backpay going back to the date of their application, while SSDI applicants can get an additional year of retroactive benefits if their disability began long before they filed an application. But during the wait time, it is extremely difficult to live with zero income and no means of support, because you can't work (except for a small amount) while waiting for a disability decision.
How can foreclosure or eviction be avoided? Sadly, it may not be avoidable for many who seek disability benefits. But the person who rents might consider moving to a cheaper rental home or speaking to a friend or relative regarding the possibility of moving in as a roommate. The person who owns his or her home might consider refinancing their home to lower their monthly payments while they wait out the disability process. Some homeowners take equity out of their house to make ends meet while for they wait for disability benefits to be approved, but there's a big risk of not being able to pay it back if the judge denies benefits at the appeal hearing.
Here are a few general tips to consider whether you rent or own your home.
1. Get a second checking account. Individuals who lose their primary source of income often have their credit negatively affected. This is a given. However, what many people may not anticipate is a situation in which they owe their bank money, and the bank closes their checking account. For example, a person who pays their car insurance through an automatic monthly draft might find that they owe money to the bank due to insufficient funds in their account. If the money owed to a bank is not repaid within a certain length of time, not only will be the account be closed, but a report will be sent to something called Chex systems. Chex systems is the equivalent of a credit bureau for checking accounts. Once a report has been sent to Chex systems, it becomes nearly impossible to open a checking account anywhere. And, of course, when one does not have a checking account, life becomes immeasurably more complicated. So, to safeguard against this possibility, it may be best to open a second checking account and keep it open, just in case.
2. Get another credit card. While it's true that, for most individuals, getting another credit card might be the worst thing to do, for the disability claimant who has a good chance of being approved for benefits, it might actually be good advice. Individuals who can qualify for cards can set aside for themselves the option of getting money to alleviate a desperate situation later.
3. Look into social services aid sooner rather than later. Many individuals feel embarrassed about the prospect of visiting their local department of social services. However, the person filing for disability benefits needs to think in terms of "how will I make it through this?" And though the benefit amount from a program such as food stamps may be low, it will nonetheless help. If you have no income and only limited assets, you should qualify for food stamps.
Many departments of social services will also have a department for adult services (different states may call this section by different names). By contacting an adult services social worker, you may be able to learn about other avenues of assistance in your immediate area. For example, adult services social workers can sometimes give referrals to privately run assistance programs and charitable organizations.
Learn more about financial help that's available while awaiting a disability decision.
By: Tim Moore, former Social Security disability claims examiner