'I racked up this debt to cover my living expenses for two years without an income stream'

"I have $8,000 per month in income, with $6,000 in fixed expenses, plus another $9,000 in medical-related payments that are not guaranteed." (Photo subject is a model.)

Dear Quentin,

I'm disabled and have accumulated $125,000 in credit-card debt. I racked up this debt to cover my living expenses for two years without an income stream. My life has turned around, but my debts remain. I have $8,000 per month in income, with $6,000 in fixed expenses, plus another $9,000 in medical-related payments that are not guaranteed.

The additional $9,000 is approved month to month and is subject to ongoing medical examinations. Would that additional $9,000 be considered in a bankruptcy filing, or should it not be taken into account because it is temporary and not guaranteed? I am drowning in debt, as the old saying goes, and I need to take action.

Desperate for Help

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Federal law provides protection for Social Security retirement and disability benefits, while worker compensation is typically not within reach of the bankruptcy courts.

Dear Desperate,

There are a few moving pieces to your question.

Obviously, $125,000 in unsecured credit-card debt with double-digit interest is unsustainable. It matters what state you live in, the regularity of these payments and whether they can be reasonably considered future income, and the source of the payments, and the kind of bankruptcy you decide to file for - Chapter 7 or Chapter 13.

Chapter 7 bankruptcy is about liquidating qualifying assets to pay off your debt. It's subject to a means test.debt. After you sell your eligible assets, the remaining debts are usually discharged, so you are free and clear to start your life anew. Your home equity, if you have any, is exempt up until a certain limit under the homestead-exemption rules.

Chapter 13 is a bit lighter, involving only a repayment plan. You need regular income and generally make payments through a trustee over three to five years. You can usually keep your property, and eligible remaining unsecured debts, including credit-card debt, may be discharged at the end of the plan. Your income and assets are taken into account for repayments.

Chapter 7 bankruptcy is primarily about total liquidation of qualifying assets and it is subject to a means test.

Given your situation, it appears you are less interested in Chapter 13. The short-term outlook may seem bleak, but does Chapter 13 give you a medium- to long-term outlook where you can finally be released from this credit-card debt? If you don't file Chapter 13 or Chapter 7, you may continue to pay the minimum amount on your credit cards.

Often, it helps to see a visual representation of your finances in black and white so you can deal with the hard facts, rather than the swirl of anxiety that accompanies them. Bankruptcy should always be a last resort. Chapter 7 bankruptcy does not require repayment, but part of your property may be subject to liens and mortgages.

Some debts generally are not dischargeable under Chapter 7 or Chapter 13, including most taxes, student loans, child support, alimony and certain fines. Chapter 13 can also be particularly useful for homeowners because it may allow them to keep their home and catch up on missed mortgage payments while being protected from foreclosure.

Some debts are now allowed to be discharged, including most taxes, student loans, child support, alimony and certain fines.

Assuming you're considering filing for Chapter 7 bankruptcy, whether that $9,000 income could be taken into account when assessing your eligibility for Chapter 7 depends on where it comes from. If it is related to a private or employee-sponsored long-term disability insurance, it's likely that it would be taken into account. It could also matter if the payments are not regular.

Federal law provides protection for Social Security retirement and disability benefits, and worker compensation is typically not within reach of the bankruptcy courts. It depends on where you live, however, as there are many mitigating factors when it comes to filing for Chapter 7. A bankruptcy attorney can - and absolutely should - advise you.

Separately, I wonder if the temporary nature of your payments are indeed related to worker compensation. The fact that the payments are being approved only month to month and are contingent on continuing medical examinations would also be a relevant factor in determining how reliable or ongoing that income is in the eyes of the bankruptcy court.

Good luck with this new, better chapter.

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More columns from Quentin Fottrell:

'I still don't have my MRI': My health insurer canceled my plan without warning. Is that legal?

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'He does not have a spouse or children': My son has a serious genetic disease. What should I do with my $1.3 million estate?

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-Quentin Fottrell