How to approach debt and creditors when you are without a job. It discusses when and how to approach creditors to help protect your credit rating.
The first thing to realize is that unemployed does not always mean that you have no income. In a two income family, unless both partners are out of work, there is some income being earned by the other person. If the unemployed status has not gone on for an extended period, unemployment compensation checks are probably still coming. You may have other sources of income, such as, child support, investments, pensions, etc. In many cases, families have a small home business going that generates a little income.
Start by assessing your situation.
If you operate without a budget, it is a good time to do some work toward establishing one. Take the time to total up you monthly expenses and payments. Now, figure out just how much income that you can expect to have come into the household per month. If the income exceeds the expenses, you will probably be able to make it alright. If you have a small deficit, it may be able to be overcame by cutting back on some of the expenses.
In the case where the difference between income and expenses is a large negative monthly number, you may have to take some extreme actions. Before doing this, check out your bank accounts and see how much cash reserve you have. If you have worked hard enough on saving, you should have enough to carry you through at least 2 or 3 months. If so, tighten your belt and start looking for that next job. The clock is ticking.
If you have no savings, you may need to look beyond your own pocketbook. Do you have relatives that can help you? Do you have a skill that you could use like doing odd jobs as a handyman or housekeeper? Some of these short-term quick income type of jobs can fill in the cracks and extend your resources. Try to avoid extending your debt. This is especially true on credit cards or pawn shops.
Make critical payments first.
Prioritize your bills. The rent or house payment should head the list. You need a place to live. However, if you have a good payment history with the bank, and your job out look is positive, you may want to go negotiate some type of agreement to pay less than the required amount for a few months. You have to have food, water, sewer, and heat. After these are taken care of, the list will become personal preference. It is best not to let your credit cards slide because the interest and payment amounts will increase to ugly levels in a hurry.
Determine what you can live without or live with less.
Cut your phone service back to the minimum amount. Do the same with cable or satellite television. You can always add it back later. Plan menus and eat at home. Delay purchasing new items, including clothes, until you must. Buy items like soda in two liters instead of cans. Turn the heat down or the air conditioner up. Find other ways to stay warm or cool.
Get rid of internet service. With all of the WiFi systems available, you can live without home internet for a while. Libraries and many restaurants (including fast food) offer this free while you are at their business. Look around for other things you can get for free or just not have for a while.
Contact creditors if it looks like you are not going to be able to make a payment.
Your credit card companies and other debt holders may give you grief about calling them when you are not able to make a payment. Do not let this discourage you. They will come closer to helping you if you strike first. However, you only want to do this if it is definite that you cannot honor your commitments to them at this time.
Published in: Personal Finance