The U.S. unemployment rate rose from about 4 percent in the mid 2000s to above 10 percent in 2009. Millions of people lost their jobs due to the economic downturn in the late 2000s. Unemployed people who carry debt have a more difficult time paying it off than people receiving a steady paycheck. However, unemployed people still can get out of debt, albeit with serious dedication and sacrifices.
Sell Your Stuff
Selling your personal items for money is one way you can pay off debt while unemployed. Sell valuable items you no longer need or use, and put the money toward paying down your debts. If some of your debt is from a car loan, sell the car to eliminate the loan and use some of the money to buy an inexpensive, functional car.
Live Below Your Means
When you are unemployed and trying to pay off debt, the worst thing you can do is go into more debt. Stop using your credit cards, and spend less money than you have coming in. Even without a regular salary, you still can bring in money through government unemployment checks or odd jobs here and there.
Make drastic changes to your spending habits. Cut out all unnecessary expenses, such as cable TV and expensive grocery items. Consider moving in with a friend or family member to save money on rent or mortgage payments. Use free resources such as the library for entertainment purposes, and use inexpensive public transportation rather than paying for an auto loan, gas and insurance. Use all of the money you save toward paying down your debt. These changes are tough to make at first, but once you get used to them, you might enjoy living frugally and will develop good ways to save money throughout your life, even when you become employed again.
Assistance Programs
Take advantage of assistance programs for which you might qualify while unemployed. The government and mortgage companies offer various mortgage assistance programs for unemployed people that can reduce your mortgage payments to help you save money, which can help you pay off debt. Credit card companies and other debtors also offer programs to reduce monthly payments or interest charges to help you pay off your debt faster. If you have good credit or a good payment history, you likely qualify for these kinds of programs, although you need to take action by calling your creditors to ask what options are available to you. Taking advantage of assistance programs helps you to continue to make payments and pay down debt with less money on hand.
Bankruptcy
Filing for bankruptcy is an extreme measure that you should use as a last resort. Some unemployed people have no other way out of debt than to file for bankruptcy. The process can eliminate some or all of your debt, but bankruptcy has a severe effect on your credit score. You likely will not qualify for loans for many years following bankruptcy. You also might lose some of your assets, such as retirement accounts, real estate or personal items, during the process. Speak to a bankruptcy attorney to discuss your options and specific consequences.
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