A woman with learning difficulties, severe epilepsy, schizophrenia, cerebral palsy and asthma recently underwent an official assessment of her fitness for work, which concluded that there was nothing preventing her from taking up employment. She was told that her benefits were to be stopped and that she needed to start searching for a job.

Upset by the news, she visited the Walthamstow Citizens Advice bureau in east London, where welfare rights adviser Sarah Tabor mounted a legal appeal on her behalf, and managed to get the decision overturned.

"The decision was ridiculous. She has had problems since birth; any rational person would have looked at the range of her conditions and realised that it would be very difficult for her to work," Tabor said. Without specialist welfare rights support, currently funded by legal aid, the woman would not have been able to contest the decision and would not have had her benefits reinstated, Tabor added.

The legal aid bill, which among other things aims to abolish legal aid for welfare and benefit cases, returns to the Commons on Tuesday and there is speculation that the government may use the controversial "financial privilege" rules to reject a Lords amendment that could mitigate some of its impact.

Campaigners warn that if the bill is passed in its original form it will leave some of the country's most vulnerable people without recourse to advice if they face a problem claiming state support. Citizens Advice believes that tens of thousands of people will be put at greater risk of homelessness and poverty without funding for their advisers. The timing of the legislation is particularly unfortunate, it adds, given that the ongoing reform of incapacity and disability benefits has thrown up so many difficulties, and given that the government will introduce a wholesale transformation of the benefits system next year when it launches universal credit.

Walthamstow CAB last year gave specialist legal support to 600 people who had been wrongly denied benefits and a further 500 people with severe debt problems. Around 70% of their clients contesting a benefits decision were people, like the woman with learning difficulties and schizophrenia, who had been classed as fit for work under the work capability assessment, which determines eligibility for the new incapacity benefit, employment and support allowance.

"The decision in her case was ludicrous, but it's not particularly unusual," Tabor said. Since the benefit was introduced more than 390,000 people have appealed against the decision that they were capable of working, and around 40% of these appeals have been successful; when claimants are given legal advice by organisations such as CAB, that success rate rises to as much as 90%.

Tabor, who is not a lawyer but is highly specialised in the complex sector of benefits law, has also been advising the parents of children whose disability living allowance has been cut, as the government tries to reduce the size of the DLA bill by 20%. The rest of the advice centre's legal aid clients were people in severe poverty trying to access crisis loans or people with housing benefit difficulties or complications with tax credits.

Andy Munton, manager of the Leytonstone CAB, also in east London, is trying to find alternative funding to save the advice service, in the event that the legal aid is cut off. But because local authority funding has already been cut, there are few alternative sources of money. If the bill is passed in its original form, he said, the office will shrink and staff will be limited to handing out self-help letters to clients explaining what they need to do to challenge decisions.

"Realistically they won't be able to do it. Many of our clients have mental health problems, literacy difficulties, or they don't speak English as a first language. They get into a bigger mess, and then it's harder to pick them up. The stress makes them more ill, which puts more pressure on the NHS," Munton said.

"The cynic would say that the government is doing this so that people can't challenge the process effectively. From the government's point of view, it's a good policy because it will save them money. People will be less able to challenge the flawed decisions that are being made as a result of welfare reform, and the benefits bill will go down."

A Ministry of Justice spokesman said in a statement: "At more than £2.1bn per year, we have one of the most expensive legal aid systems in the world, which in the current financial climate we just cannot continue to afford.

"The wide-ranging availability of legal aid can lead people to assume legal action is their only option, even where early practical advice could be of more help to them and avoid them needing a lawyer at all."

The statement added that the government had committed an extra £60m to support the provision of general advice by organisations like CAB over the next three years.

Gillian Guy, chief executive of CAB, said this money was not enough to preserve the services currently offered, and stressed that trained, paid specialists – who were able to digest the 9,000 pages of benefits guidance issued by the Department for Work and Pensions – were vital, if some of the country's most vulnerable people were to get support in claiming the benefits to which they are entitled.

She added that it was precisely this swift practical advice that the CAB and other legal aid-funded welfare rights centres were offering, adding that the charity's research suggested that every pound spent on early advice saved around £9 later, partly by avoiding unnecessary and expensive tribunal hearings.

"People will suffer more and more hardship if they can't get the payments they are entitled to," she said.

A large consortium of disability charities has been campaigning against this aspect of the legal aid bill,. They still hope that the amendment successfully tabled in the Lords by the Liberal Democrat peer Lady Doocey and others, which preserves legal aid for the most serious appeals against welfare benefits decisions, will be retained when the legislation returns to the Commons this week.

Richard Hawkes, chief executive of the disability charity Scope, said: "To cut legal aid at a time of unprecedented changes to welfare support would mean disabled people who fall foul of poor decision-making, red tape or administrative error being pushed even further into poverty as they struggle to manoeuvre the complicated legal system without the expert support they need.

"This could result in a ticking timebomb of poorly prepared and lengthy tribunals and appeals, choking the courts and not saving money, but actually costing the government far more in the long term."