Managing Debt After Losing Your Job

Job loss can simultaneously lead to increased debt and severely curtail the ability to make repayments in any kind of economic climate. In this volatile economy, many people are willing to meet their obligations, but simply cannot. Banks, credit card companies and legitimate debt collection companies know this.They are willing to work with customers to mutually resolve debt problems and, ultimately, help protect the future security of customers.

Portfolio Recovery Associates (PRA) recommends that customers and consumers experiencing hardship take certain steps to help gain better financial footing and to send the right message to creditors. Six debt management tips are outlined below.

1) Call your bank, credit card company, or the collection agency to see if you can work out alternative arrangements, such as interest-only payments. It could be the breathing room you need if, for example, you wind up paying $15 per month instead of a minimum $100 for the time you need to get back on your feet.

2) If interest-only payments aren’t possible, ask about repaying the debt over a longer span of time.

3) You may be able to reduce your mortgage burden by asking about “forbearance agreements” that let you pay a fraction of your monthly mortgage until you find a job. Remember, most mortgage lenders don’t want to foreclose. They want active, paying accounts.

4) Contact all your utility companies, including cell phone companies, to arrange a payment schedule. Be sure to adhere to that schedule.

5) Consider contacting a credible debt counseling service to revise your household budget, negotiate repayments and find alternatives to bankruptcy. The Consumer Credit Counseling Service (CCS) offers free debt advice from counselors in your area, and the U.S. Department of Justice Web site provides a list of credit counseling agencies it approves.

6) Once you find a new job, write a 100-word statement to be included in your credit report. It could be helpful for your credit rating and explaining your situation to future creditors.

It’s a good idea to start off every conversation by saying you’ve lost your job and are working hard to find a new one. It immediately provides a reason for your financial problems, with which most people will empathize.