How to Deal with Credit Card Debt When Unemployed

It can really shake your confidence to lose your job. Being fired, laid off, furloughed, or downsized definitely rocks the boat in many different areas of your life. Finances, relationships, and plans for the future all seem to be up in the air. It’s difficult enough when you have savings to get you through, but when you have to deal with credit card debt when unemployed, the anxiety and misery goes from bearable to burden. We’ve got some tips to make things easier for you and to help you come back to financial health and stability.

You’re Not Alone

America’s credit card debt is terrifying. Total outstanding US consumer debt is $3.9 trillion, and of that debt $1.3 trillion is in credit card debt. Moreover, it is households with the lowest net worth that hold the highest credit card debt – $10,308. Subprime credit cards pray on lower income people providing access to credit, but at a high interest rate, and frequent fees. In fact, the Miami Metro area has some of the highest average credit card debt in Florida – exceeded only by Gainesville.

How Did We Get Here?

Wages have stagnated despite the surge in employment accompanying the end of the recession. Wages had been flat for decades previous to the recession, but credit card usage increased over the decades to the level where it is now. Unfortunately, much of this increase has been driven by charging everyday expenses such as groceries, medicines, and even medical bills. Rewards cards offering points and perks have also help to drive a plastic fantastic surge of spending. However, Americans are wising up and the demand for new sources of credit is falling to a historic low while credit card account closings are climbing.

How Do We Get Out?

The first thing to do to deal with credit card debt when unemployed is not to panic! When you panic, you are not making informed decisions. You are simply reacting to your own fears and insecurities that are magnified by losing your job and your source of income. Your first thought is probably about being able to keep a roof overhead and provide for your family. If you’re young and single, then the thought of moving back into your parents’ basement is probably humiliating. However, there are steps that you can take to deal with credit card debt when unemployed.

1. Look into hardship programs. Credit card companies, mortgage lenders, student loan servicers, and auto lenders have programs available to reduce or defer payments. They don’t all have the same terms, so you’ll have to go case-by-case to investigate what they have to offer.
3. Tighten your belt. Take a look at your discretionary spending to see what you can live without while you look for another job. Make meals at home instead of purchasing prepared food or eating at a restaurant. Cut back on subscriptions that you are not using. And even take the opportunity to cut the cable cord.
4. Gig. Using gigs to keep a cash flow moving while you look for work is a better idea than just sitting around. Gig work such as ridesharing means you can be out, moving around, interacting with people, and networking while making some money to go towards expenses.
5. Consider consolidation. If you sit down and add up all of the minimum payments you are making on your outstanding credit card balances, it may be worthwhile to consider taking out a personal loan. The interest charges can be less, and by consolidating everything into one payment you could save money each month.
6. Apply for benefits. You should apply for whatever benefits you may be eligible. This includes SNAP, unemployment, and other programs.
7. If you are in deep with a high debt to income ratio, then it might be time to consider a personal bankruptcy. Normally, you should not right from unemployment to the B word, but when your debts were overwhelming when you have a job, unemployment will make them even more so.
8. Try not to use your cards while you were unemployed. It can be difficult if you are short of cash for basic necessities such as food, utilities, transportation, and medicine. However, driving your balances higher will also increase your minimum payments.
9. Do not tap into a retirement account to pay down debts. You will be taxed on the withdrawal and may have to pay a sizeable penalty. Besides, retirement accounts and pensions are exempt from creditors ina personalbankruptcy.
10. Do not take out a HELOC if you have a high debt to income ratio. Your home is exempt from creditors in bankruptcy by Florida law, but taking out a HELOC could put that in jeopardy.

Talk to a financial advisor about debt settlements, bankruptcy, consolidation, and other strategies to ease the squeeze of dealing with debt when you are unemployed or furloughed. Losing your job is not the end of the world, and it can actually open up new fields of opportunities. It’s going to be tough to get through, but you can emerge on the other end leaner, meaner, and in better financial condition than you might expect.

We Want to Help You to Deal with Credit Card Debt When Unemployed

At Van Horn Law Group, we want to make it easier for you to deal with credit card debt when unemployed. Even if you are unemployed, there are steps that you can take to make sure that the debt doesn’t rule your life. Whether it is credit card debt, medical debt, student loan debt, or other pressures, we are here to help you get a grip. There are so many different avenues to handle that, and our experienced staff and attorneys are here to help. Visit our West Palm Beach and Fort Lauderdale offices Monday through Saturday or make a special appointment for Sunday. We will do whatever it takes to help you resolve your debts once and for all.