Job Loss and Debt Series: How to Get Out of Debt When You’re Unemployed

August 2, 2018

It can be a nightmare situation — you’re in debt and you’re hit with a job loss. Figuring out how to get out of debt can be difficult while you have a job, and the problem is magnified when you’re unemployed. So, what can you do?

Don’t panic — you have options.

If you’re unemployed and in debt, there are three basic tenets that will help you the most:

Make a plan and be proactive.
Avoid further debt.
Seek help.

Let’s start with number one — make a plan and be proactive.

To get out of debt, you’ll want to start by taking stock of your current financial situation. How much debt are you carrying? What are the minimum payments? At the very least, you want to keep up with those. It may seem counterintuitive but paying down your debt will actually help you better survive while unemployed. The less money you have to put towards debt payments means more that you can put towards keeping up with living expenses.

There’s another reason that it’s important to keep up with your debt payments. Not making your payments on time will show up on your credit report, which could make finding a new job harder, depending on the industry. Some employers look at your credit report before they offer you a job.

Once you know how much you owe, you can contact your current creditors. They might offer you a lower interest rate or negotiate lower payments while you’re unemployed. Some may even provide a debt consolidation option to combine your debts into one lower monthly payment. If this is offered to you, be wary, though — it may come with some unfavourable long-term consequences. If you’re not sure about an offer, contact a financial professional for advice, first.

You’ll also want to:

Prioritize your payments. You need to make your utility payments, like electricity and water, for example, to keep those services going.
Look at your insurance policies. If you have credit card balance insurance, mortgage payment insurance, or something similar, you might be covered for job loss.

Second, don’t accumulate more debt. It can be tempting to go for a quick-cash option, like a payday loan or racking up your credit card balance, but this will put you in a much worse situation debt-wise. Find ways to trim your budget and cut down on costs to avoid sinking further into debt.

That brings us to point number three — seeking professional help. Job loss can happen to anyone and there’s no shame in using resources that are provided for this very instance. See if you’re eligible for Employment Insurance or other assistance and determine how much money you are entitled to receive.

Financial professionals can also help you cope and recover. Whether it’s assisting with creating a personal budget, helping with debt consolidation – or if you’re carrying a large amount of debt, exploring options like Consumer Proposals and Bankruptcy – a financial counsellor can help you get back on the right track.

Being in debt can make job loss all the scarier, and vice versa. But you don’t have to go it alone. Fuller Landau Debt Solutions will help you make a personalized plan to bounce back to financial stability.