Debt Relief Options For The Unemployed
Losing your job can be an incredibly stressful experience. Not only do you lose your regular source of income, but you also have to figure out how to pay your ongoing expenses and debts without a steady paycheck. This can feel overwhelming, but there are options for getting debt relief even if you are unemployed.At Delancey Street financial company, we understand how difficult unemployment can be. We want to help you get through this challenging time without being burdened by high-interest debt. In this article, we’ll discuss some of the best debt relief options to consider if you are currently unemployed.
Communicate With Your Lenders
The first step is to contact all of your lenders, including credit card companies, auto lenders, mortgage companies, etc. Let them know about your situation – that you lost your job and need some temporary relief. Many lenders have hardship programs in place for situations just like this.For example, your credit card company may be able to reduce or defer your minimum monthly payment for a few months. This can help ease the burden while you get back on your feet. Your auto lender may be able to reduce your monthly payment as well. Most lenders want to work with borrowers, so don’t be afraid to ask for help.Be sure to contact your lenders as soon as possible though. The sooner you reach out, the more options will be available to you. If you wait too long and begin missing payments, it will be harder to get assistance.
Enroll In Credit Counseling
Another option is to enroll in credit counseling through a reputable nonprofit agency. Credit counseling provides education on managing your finances, as well as setting up a Debt Management Plan (DMP).In a DMP, the counselor works with your creditors to negotiate reduced interest rates and monthly payments. Your new consolidated payment goes to the credit counseling agency each month, and they disburse payments to your creditors. This can make managing payments much easier when money is tight.The benefits of a DMP include:
- One monthly payment instead of multiple payments
- Lower interest rates, waived fees, etc.
- More affordable monthly payments
- Helps avoid delinquency and protects your credit
Credit counseling is often free or very low cost. Make sure to choose an accredited nonprofit agency for the best results.
Apply For Government Aid
Don’t forget to apply for any government assistance that you may qualify for if you are unemployed. Programs like unemployment benefits and food stamps can help cover your basic living expenses so you can focus cash towards debt payments.The CARES Act also created temporary provisions for expanded unemployment benefits, one-time stimulus payments, and more. Make sure to see what aid packages you are eligible for and take advantage of them.Every little bit helps when you are out of work and struggling with debt. Government aid takes some pressure off so you can work on getting back on your feet.
If you have a large amount of unsecured debt like credit cards, debt settlement may be an option. In debt settlement, you stop making payments to your creditors. The debt settlement company then negotiates with your creditors to settle your debts for a fraction of what you owe.This can be a good solution if you have a lot of debt and little income coming in. Debt settlement allows you to resolve debts for much less than the full balance. However, it will tank your credit scores in the short term. It also doesn’t stop debt collection calls and potential lawsuits in the meantime.Make sure to choose a reputable debt settlement company and understand all the risks involved before pursuing this option. It can work in some situations but may not be the best choice for everyone.
Balance Transfer Credit Card
Balance transfer credit cards allow you to transfer high-interest debt onto a new card and pay 0% interest for 12-18 months. This pause on interest accumulation can help you pay down principal much faster.However, most balance transfer offers require good credit, so you may not qualify if you are unemployed. Even if you do qualify, make sure you have a plan to pay off the full balance before the 0% rate expires. Otherwise, any remaining balance will start accruing interest again.Balance transfers also come with fees, usually 3-5% of the amount transferred. So make sure to run the numbers to see if it makes sense for your situation.
Borrower’s Defense Against Repayment
If you have federal student loans, you may be able to have your loans forgiven under Borrower’s Defense Against Repayment. This program forgives loans if the school you attended misled you or engaged in other misconduct.Over 98% of Borrower’s Defense claims are approved, resulting in full or partial federal student loan forgiveness. This can eliminate a significant debt burden, especially during unemployment.
As a last resort, filing for bankruptcy may be an option if you have a large amount of debt and very little income coming in. Bankruptcy legally eliminates many types of consumer debt including credit cards, medical bills, personal loans, etc.However, bankruptcy damages your credit for years and won’t eliminate certain debts like student loans. It also costs money to file, with attorney fees ranging from $1,500-$3,000 on average.Still, bankruptcy can provide a fresh start if you have no other options. An attorney can advise if it makes sense for your unique situation.
Create A Budget
No matter what debt relief options you pursue, it’s critical to create a budget. List all your income sources like unemployment benefits. Then list your minimum monthly debt payments, along with essential expenses like food, utilities, etc.See where you can cut back on discretionary spending to direct as much money towards your debts as possible. Even an extra $100 or $200 per month can make a difference.You may need to make some sacrifices, like decreasing entertainment costs, eating out less, etc. But a tight budget will help you weather this storm until you find a new job.
Pick Up A Side Gig
Consider taking on a side gig for extra income in the interim. Every extra dollar you earn can go towards debt payments or rebuilding your emergency fund.Options like rideshare driving, food delivery, freelance work, etc. allow you to work flexible hours to accommodate job searching. You can find gigs on sites like Uber, TaskRabbit, Fiverr, Upwork, and more.
Lean On Your Support System
Don’t be afraid to ask for help from family and friends during this difficult time. Maybe someone can loan you a little cash, help out with groceries, or offer moral support. If you have a spouse or partner, make sure to communicate about how household expenses will be impacted.Coping with unemployment and debt can be isolating. But surrounding yourself with a strong support system makes a huge difference.
Take Advantage Of Assistance Programs
There are many other organizations that offer help for people who are unemployed or struggling with debt:
- Unemployment offices – Provide job placement services, career counseling, resume help, skills testing, and more.
- United Way – Offers financial stability programs and assistance with food, shelter, utilities, and more.
- Salvation Army – Provides financial assistance for housing, food, and other necessities.
- Catholic Charities – Offers emergency financial assistance through local agencies.
- Jewish Federations of North America – Provides emergency cash assistance and other help.
Don’t be afraid to reach out to groups like these. That’s what they are there for – to help people in need get back on their feet.
Prioritize Your Mental Health
Job loss can severely impact your emotional well-being. Feelings of depression and anxiety are common. Make sure to take care of your mental health during this challenging time.Exercise regularly, get plenty of sleep, eat healthy foods, stay connected with loved ones, and do activities you enjoy. If needed, reach out to a therapist or counselor for extra support. Don’t neglect your mental health as you navigate unemployment and debt.
Be Patient With Yourself
Finally, be kind to yourself. Losing your job and dealing with the resulting financial fallout is tough. No one expects you to handle it perfectly.Give yourself permission to feel whatever emotions come up. Take things one day at a time. Stay focused on the next right step, not the big picture. Know that this situation is temporary, and better days lie ahead.
We Can Help With Debt Relief
Here at Delancey Street, we assist people with all types of debt relief options, even during unemployment. Our experts can help you explore programs to reduce or defer your monthly payments. We can set up free credit counseling sessions and debt management plans.If debt settlement or bankruptcy end up being good solutions, we can get you in touch with reputable companies offering those services. And we assist with student loan forgiveness applications for those who qualify.Our services are always 100% free. We are here to help you find the optimal debt relief strategies so you can stress less and regain control of your finances. Our dedicated debt relief specialists are ready to help you create a customized action plan.Contact us today to schedule your free debt relief consultation. We will evaluate your unique situation and recommend the best path forward so you can overcome unemployment and debt. With personalized guidance, you can develop a plan to reduce your payments, lower your interest rates, consolidate debts, and more.Delancey Street is here to help you every step of the way. Don’t wait – get in touch with us and start taking control of your debt today.