It is a difficult situation. But there could be several ways to handle it to probably reduce its effect.
1) Because your income has reduced, the 17,000 retirement 1099 income on your tax return may not be as big an effect as you are thinking. Consult with your CPA return preparer. At most at 30%, say, it is only 5,100 tax effect you are looking at. Then, you can apply for an installment payment plan with the IRS to pay that off in 6 years. Not a bad deal. The U.S. government loans you the money, and its interest rate is reasonable. The payment you make to them is towards the tax liability first.
2) Apply for unemployment still. Even if you now have a job, reduced hours is a ground for maintaining unemployment security income, even if the payment may be reduced.
3) You can borrow money from whomever is willing to loan to you. When they count your income, they will count the social security income as part of your income source.
4) Consider the following sources for borrowing. a) on your house as line of credit of a home equity loan; b) take out several credit card with one year or half a year interest free. And be discipline to pay them down as soon as possible. What can be done here is to at least get your 17,000 effect reduced some, even if you cannot cover the entire 17,000. Then, you can use your monthly social security income to pay them off or down.
5) Try to recall the reason why you borrowed 17,000 to start with. Has this source of expenses recovered you any benefit? For example, if you take out the loan to help your relatives, to pay for some bills, can you go to that source to get money back to pay back this 17,000? For example, if you take out the money to buy a motorcycle. You can now sell that motorcycle to help pay back this 17,000.
6) Walk into your long-relationship bank. Instead of complaining about our lower wages now, you simply present yourself as needing a personal loan and ask how much they can loan you the money. Show them all your income. There are banks still make signature, personal loan, if the borrower has monthly, steady income. At this point, your social security income now becomes valuable. Then, in a way, you are borrowing against your social security.
7) Do NOT go to loan sharks. If the interest you are paying is more than the income tax rate, most likely only about 20%, you will be better off to borrow from the U.S. government than from any one else.
8) Sell some assets. When we are younger, we purchase. Now, we feel that we don't really need it, and we can get rid of it. Of course, not many items we possess can give us money back as we purchase at. However, they are for times like this. If we would like to have cash on hand, the stuff is really not worth to become inheritance, consider to sell them.
9) Your goal may not be to pay off the entire 17,000. Even some, you may feel better. However, if paying off the money you already spent will cause you further, increased financial issues, taking tax effect may not be the worse alternative.
Fiona Chen, MPA, Ph.D., CPA, ABV, CFF, CITP