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May 5th, 2010

Unemployed? Tips for Finding Debt Help

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Anyone carrying significant credit card debt risks financial ruin if they become unemployed because options for managing credit card debt decrease:

  • You can’t qualify for debt consolidation loans without verifiable, sufficient income.
  • You won’t be able to transfer credit card balances to lower cost accounts by opening new accounts the offer lower fees and rates on balance transfers.
  • If you own a home, you may not qualify for home equity financing that can you can use to pay off credit card debt.
  • When creditors learn of your unemployment, they may raise rates, cut credit lines, or close your accounts.

If your current finances are ruined by unemployment or reduced income, you need to assess and revise your debt management plan according to your new situation:

  • Establish how much income and assets you have available to meet monthly expenses.
  • Determine who, how much, and the cost of debt you owe. Make a list of creditors, balances, minimum monthly payments, and the annual percentage rate (APR) for each account.
  • Subtract your monthly expenses from your monthly net income. If you owe more than you can pay each month, contact a non-profit consumer credit counseling service for help.

Credit Counseling Offers Budget Planning and Advice

Consumer credit counseling and debt consolidation plans are developed based on your ability to repay your debts. Your credit counselor works with creditors toward establishing an affordable repayment plan. Here’s how these services typically work:

Initial consultation: You set up an appointment to meet with a credit counselor and bring financial information and information about your debts to your consultation.

Making a debt management plan: Your credit counselor asks questions and evaluates your situation based on your interview and the information you’ve provided. If repaying your debt via a debt management plan is feasible, the credit counseling service contacts your creditors and attempt to reach affordable repayment terms on your behalf.

When you agree to the terms of credit counseling and a debt management plan, you sign an agreement specifying:

  • Effective dates, payment amounts and schedule, and the ending date for debt repayment
  • Costs and fees charged by your credit counseling service
  • Amounts you agree to pay toward your debt management plan
  • Terms, conditions, and requirements of your debt management plan

Your debt management plan includes designing a cash-based budget that eliminates using credit cards for routine household expenses. Your new budget also provides for savings.

Kicking Credit Card Debt to the Curb

Some debt management plans require that you close all of your credit card accounts, others allow you to keep one account open to cover emergencies. Staying focused on eliminating credit card debt requires determination and dedication, but eliminating your credit card debt is a worthy reward.

Post written by Karen Lawson

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  • Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score. Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management. He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others. He can be contacted by visiting his personal site, GoodCreditLiving.com.

  • Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.

  • Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno. She enjoys writing informative articles about debt management and personal finance.

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