Wednesday, March 22, 2023

Resolve Credit Card Debt When Unemployed

Don't Miss

Achieve Financial Control How Much Debt Do You Have

Is It Worth Trying to Settle Credit Card Debt?

Or speak to a debt consultant

Although unemployment went down slightly last month 13% in May compared to the record-high of 14.4% in April its still at the highest levels since the Great Depression. Experts can only guess at how quickly the economy may recover some expect it to bounce back once the coronavirus threat has passed, while others speculate that we could be in for a long, slow recovery similar to the Depression.

Regardless of how the economy overall is doing, what really matters is your employment situation. If youre one of the more than 40 million Americans who filed unemployment claims since March, you may be concerned about your finances, and especially how to manage credit card debt when you dont have income coming in like you used to.

Here are steps you can take to figure out what to do about your debt while youre unemployed:

  • Assess your savings and survival budget

  • Determine if you can afford minimum payments

  • Ask credit card companies to work with you

  • Talk to a credit counselor

  • Consider a consolidation loan with a co-applicant

  • Look into a debt relief program

  • Consider bankruptcy

  • Give yourself a break

  • Consider Lending Options That Could Provide Cash But Be Careful

    As you look for ways to keep yourself afloat during this period of unemployment, you may consider financing solutions that can provide cash. Getting funds that you keep you out of the red for a few months may sound like a no-brainer. However, there are some key points that youll want to consider before you get a loan that you potentially dont have the means to pay back.

    • How much time will you have before the new loan payments start? Will that be enough time for you to find new full-time employment?
    • How much does the new loan increase your financial risk? What will you be risking by taking those funds out?
    • How much will this new loan cost you and when will you need to pick up that tab?

    Here are some of the most common financing solutions that people consider when theyre facing unemployment. Understand the risks of each of these options and make sure to talk to an expert before you use any financing solution during a period of unemployment.

    Make The Minimum Payment If You Can

    During times of limited income, keeping money on hand for the essentials is key. First, youll need to address mandatory expenses like keeping a roof over your head and food on the table. Then, if you can continue to make the minimum payment on credit cards, thats great. But if doing so would take money away from critical needs like food or shelter, you may end up missing a payment or two if your creditor doesnt offer support.

    Recommended Reading: Is Unemployment Coming Back 2022

    Beware Of Debt Settlement Scams

    Some companies offering debt settlement programs may engage in deception and fail to deliver on the promises they make for example, promises or guarantees to settle all your credit card debts for, say, 30 to 60 percent of the amount you owe. Other companies may try to collect their own fees from you before they have settled any of your debts a practice prohibited under the FTCs Telemarketing Sales Rule for companies engaged in telemarketing these services. Some fail to explain the risks associated with their programs: for example, that many consumers drop out without settling their debts, that consumers credit reports may suffer, or that debt collectors may continue to call you.Avoid doing business with any company that promises to settle your debt if the company:

    • charges any fees before it settles your debts
    • touts a “new government program” to bail out personal credit card debt
    • guarantees it can make your unsecured debt go away
    • tells you to stop communicating with your creditors, but doesnt explain the serious consequences
    • tells you it can stop all debt collection calls and lawsuits
    • guarantees that your unsecured debts can be paid off for pennies on the dollar

    Consider Working With Credit Counselors To Understand Your Options

    Debt Settlement for Credit Card Debt: Company &  Process Info

    Reputable are generally non-profit organizations that can advise you on your money and debts and help you with a budget. Some may also help you negotiate with creditors. These trained professionals provide advice for little or no cost, and they will work with you to:

    • Discuss your situation

    Warning: If youre considering working with a debt settlement company to address your debts, be skeptical of any company that promises to do it for an upfront fee.

    Also Check: How Do I Get Money Off My Unemployment Card

    Should I Withdraw Money From My 401 While Im Unemployed

    No. If you pull money out of tax-deferred retirement plans like 401s and traditional IRAs, you could face sizable tax penalties for early withdrawals. Worse still, you will be depleting accounts intended to fund your retirement, opening the door to future financial woes.

    Again, its important to consider the consequences and try to avoid early retirement-account withdrawals.

    Check If Youre Responsible For The Debt

    You’re responsible for the debt if you signed a contract with the credit card company. This is called a ‘credit agreement’.

    In some cases, you might have signed a credit agreement along with someone else – for example your partner. If both your names are on the agreement, youre both responsible for the debt. If the other person stops paying, the credit card company can make you pay the full amount.

    If youre an additional cardholder on someone elses credit card, you’re only responsible for the debt if you signed the credit agreement.

    If youre not responsible for the debt and a credit card company is trying to make you pay, explain the situation and ask them to stop. If they dont stop, you can complain to the Financial Ombudsman Service. They investigate complaints about banks and building societies and can make them stop.

    Contact the Financial Ombudsman Service on their website.

    Recommended Reading: How Do I Know If I Get Approved For Unemployment

    Listing Income On Your Application

    Think about the income you’re relying on to get by while you’re unemployed. If you’re over 21, the allows you to list any household income to which you have a “reasonable expectation of access.” This includes income from your spouse or partner as well as sources of nonwage income such as investment returns or Social Security payments. If you’ve lost your job, you can include unemployment benefits on your application.

    » MORE:25 ways to make money online, offline and at home

    The Credit Card Act of 2009 allows you to list any household income to which you have a ‘reasonable expectation of access.’

    Getting approved for a credit card depends on your income, your credit history and your debt-to-income ratio, which is your current debt payments as a percentage of your income. If you’re approved, your credit limit will depend on your income and debt-to-income ratio.

    The Credit Card Act requires lenders to consider your ability to make your payments when you apply for a credit card. Thats why some of them also look into your payment obligations such as your rent or mortgage, alimony or debts.

    » MORE: How to report income on your credit card application

    Can You Get Rid Of Credit Card Debt Without Paying

    Can You Settle Credit Card Debt If You Are Still Current?

    There is no easy answer when it comes to getting rid of credit card debt without paying. However, there are a few methods that may help you get out of debt without having to make any payments. One method is to transfer your balance to a 0% APR credit card. This will allow you to avoid paying any interest on your debt for a period of time. Another method is to negotiate with your credit card company for a lower interest rate or a payment plan that you can afford.

    Iowa residents have the lowest credit card debt among all states, with $4,774, followed by Alaska residents with $8,026. Under the law, a borrower is legally obligated to pay the credit he or she used. As a result, the lenders will be eager to recover all of this money. A debt settlement occurs when a lender agrees to lower the balance while still thinking that the debt has been resolved. Its an excellent way to get rid of credit card debt legally. One way to proceed is to attempt the negotiation yourself or hire a professional. Chapter 7 is a type of bankruptcy, while Chapter 13 is a type of Chapter 11 bankruptcy.

    Also Check: How To Get Proof Of Income From Unemployment

    Carefully Consider Further Credit Card Use

    You might be able to use your credit card to cover expenses, like groceries or other bills. But it might make sense to use your card sparingly and limit spending to essentials. You could also consider these options:

    • Redeem credit card rewards. If you have a card with cash back, points or other user perks, it might be time to cash in on them. If youâre a Capital One customer, learn more about how to redeem your rewards.
    • Adjust your payment dates. If it feels like all your bills are due the same day each month, you might be able to change when your credit card payment is due. Your new due date will take effect within two billing cycles.
    • Make your minimum monthly payment, if possible. If you canât manage the CFPBâs recommendation to pay your credit card bills in full each month, consider paying as much as you can but at least the minimum payment. It could help you avoid paying extra fees.
    • Apply for a balance transfer. A balance transfer could be a way to pay down an existing balance at a lower, more manageable interest rate for a limited time. This period could be anywhere from six months to two years, depending on the card and the offer. Youâre still on the hook for minimum payments, but interest wonât add up during the promotional period.

    If you have an emergency fund, consider whether now is the time to use it.

    S To Take When You Get A New Job

    Once you secure new employment and start to receive steady paychecks again, you need to make a plan to regain financial stability. These tips can help:

    • Dont restore expenses you cut from your budget until youre in the clear with the debt you generated during your unemployment period. Stay on a tight budget until youre really back to maintaining stability, then you can start to reintroduce those expenses that you cut.
    • Assess where each of your debts stands:
    • Charged off / default
  • Concentrate on keeping the current debts paid on time and bringing those that are slightly past-due current.
  • If a debt is past-due, call the creditor to make payment arrangements to catch up. You may be able to set up something called a workout arrangement, where the creditor helps you set up catchup payments and may agree to freeze interest charges so you can pay off the debt faster. Your account will generally be frozen during this time.
  • For debts that have already been sold to collectors, debt settlement is really the best option to use. You offer a percentage of the balance you owe and in exchange, the collector agrees to discharge the remaining balance.
  • Ready to get out of debt? We can help. Get a free evaluation now.

    Read Also: How Much Is Unemployment In Alabama 2021

    Work With A Nonprofit Credit Counselor

    If budgeting and identifying strategies to deal with debt becomes overwhelming on your own, seek out help from a reputable nonprofit .

    Agencies affiliated with the National Association for Credit Counseling, for instance, have trained counselors on staff who can assist you in making a basic budget and considering your options for paying credit card bills on a tight income. Your first hour-long consultationwhich may be all you needis free. Credit counseling agencies also offer debt management plans: These require you to make one monthly payment to the agency, which negotiates with creditors and pays them on your behalf.

    But don’t confuse debt management with debt settlement, which is offered by debt relief companies that counsel you to stop paying your creditors. That can hurt your credit score and lead to costly fees. When you’re feeling stressed during a period of unemployment, avoid agreeing to a debt settlement plan that could cause long-term harm. Working with a well-regarded nonprofit credit counseling agency is a safer bet.

    If You Can Only Afford The Minimum Repayment


    You should keep paying the minimum amount as youll avoid paying fees – but you will be charged interest.

    If you dont think your situation is likely to change, you might be able to:

    • move the debt to another card that charges less interest – this is called a balance transfer

    • get a loan that charges less interest than your credit card

    Compare the cards or loans you can get from different companies. Think about:

    • if there will be a fee to move your balance to another card

    • what interest and charges youll pay on the new card or loan

    • the length of any interest free period

    Only use a loan or new card to help pay off the debt you already have. Don’t spend any more on your existing credit card.

    If you get a loan, dont get a loan thats linked to your home – like a mortgage. You might lose your home if you cant pay it back.

    You May Like: How Do I Fix Unresolved Issues With Unemployment

    What Should You Do If You Lose Your Job And Cannot Pay Debts

    If youre having trouble paying your bills after losing your job, youre not alone. in particular can feel overwhelming even when you are employed, and many people struggle to make ends meet after being laid off or furloughed.

    Here are some ways to begin managing your debt during a period of unemployment:

    These tactics can also help you get relief from other forms of debt, like personal loans, auto loans and home equity loans.

    Three Prioritise Your Remaining Debts

    Always prioritise your mortgage or rent and household bills. Your credit card company might be quicker to remind you of a missed payment, but dont be tempted to take risks with the roof over your head.

    Losing your job can easily tip you over from a situation where you were managing your repayments into one where theyre starting to feel out of control.

    Start by being clear which of your debts are priority.

    You May Like: How To Set Up Direct Deposit For Oklahoma Unemployment

    I’m In Debt With No Job And No Money What To Do

    Chloe Meltzer | October 19, 2022

    Summary: Did you recently lose your job? Not sure how you’re going to manage your debt with no job and no money? Find out what you can do to get back on your feet again.

    If you are suffering from debt and you are unemployed with no savings, it can be very stressful. Although you might feel hopeless, you have options. One of these options could be a credit card, but this is usually a bad idea. Many credit cards will allow you to make a minimum payment and carry credit, but it will lead to cumulative interest. This can add a huge amount of debt on to your plate. There are a few courses of action you can take in this situation.

    Need To Pay Off Credit Card Debt

    You Don’t Have To Pay Your Bills

    If you have credit card debt, youre not alone. In fact, according to a report from the Federal Reserve, the average American household has $5,700 in credit card debt. If youre struggling to pay off your credit card debt, there are a few things you can do to make the process easier. First, create a budget and make a plan. Determine how much you can realistically afford to pay towards your credit card debt each month. Then, make a list of your from smallest to largest. Once you have a plan, stick to it. Another thing you can do to pay off your credit card debt is to transfer your balance to a card with a lower interest rate. This will help you save money on interest and make it easier to pay off your debt. Finally, make sure youre paying more than the minimum payment each month. The minimum payment is the amount youre required to pay to keep your account current, but its not enough to actually make a dent in your debt. If you can, try to double or triple your minimum payment each month. If youre struggling to pay off your credit card debt, know that youre not alone. But with a little planning and discipline, you can get out of debt and start fresh.

    Read Also: How To Get More Unemployment Benefits

    Settling Credit Card Debt

    If you’ve maxed out your credit cards and are getting deeper in debt, chances are you’re feeling overwhelmed. How are you ever going to pay down the debt? Now imagine hearing about a company that promises to reduce or even erase your debt for pennies on the dollar. Sounds like the answer to your problems, right?

    The Federal Trade Commission , the nation’s consumer protection agency, says slow down, and consider how you can get out of the red without spending a whole lot of green.

    Contact Your Credit Card Issuers

    As soon as you know you’ll have trouble covering minimum credit card payments, ask your credit card issuers for help.

    Depending on the company, it may agree to reduce your interest rates or minimum payments. If you’ve already fallen behind and accrued late fees, request that those fees be waived. You can even ask for forbearance, which is a temporary hiatus from paying your bill.

    When you’re honest and share that you’re experiencing a temporary financial setback, your credit card issuer may come through as an ally. Having a long history of on-time payments with the company could also be an asset. If the issuer isn’t willing to work with you, ask other lenders for assistance: You could qualify for a modification program through your student loan or mortgage lender, for instance, freeing up money for credit card payments.

    Some credit card issuers offer payment protection plans, which, for an ongoing monthly fee, will allow you to pause making minimum payments in certain circumstances. But these plans come with a range of eligibility requirements and limitations, which may make them difficult to fully utilize. Instead, consider setting aside the amount you’d pay for a payment protection plan in an emergency fund so you have the flexibility to cover bills when you need to.

    Recommended Reading: How To Make Money Fast While Unemployed

    More articles

    Popular Articles