Losing a job is a horrifying experience, especially if you have large amounts of credit card debt and are now on a very limited income. Above all, you must make sure you do not panic and take steps to address your situation as quickly as possible. In order to protect your assets and credit rating, apply for any assistance that is available, speak with your creditors and work with a credit counseling firm if you need some extra help.
Stabilize Your Situation
Losing a job is traumatic, but you cannot let it mire you in depression and hopelessness. You should immediately contact your local or state Department of Labor and file to receive unemployment benefits. Look over your expenses and slash any non-essential bills -- buying food and paying for heat are essential; premium cable channels and magazine subscriptions are not. If your financial situation is especially dire, check into other assistance programs such as food stamps or WIC checks. Update your resume and immediately begin looking for a new job -- be prepared to take a temporary job if you cannot find one in your industry right away. By taking these measures, you will minimize the damage (financial and emotional) that losing your job can inflict.
Notify Your Creditors
Many people never take this step, either due to fear or embarrassment. However, it is critical that you call any lenders you owe money to and explain your situation. Many credit card companies and other lenders will work with you to reduce your monthly payments and structure a temporary payment plan that fits within your budget. You may be required to provide proof that you are unemployed or have filed for unemployment benefits. Taking this step can show your creditors that you have every intention of paying them back and will help prevent black marks on your credit report, which can haunt you long after you are back on your feet. Make sure you do not get in the downward spiral of using one credit card to pay balances on another one -- speak to your creditors, be honest about your situation and come up with a plan with which you can live.
Hire a Credit Counselor
There are many credit counseling firms that will help you negotiate with creditors and collection agencies. These companies can help you lower your interest rates, reschedule when your bills are due and consolidate all of your debt into a lower rate loan. However, be very careful when choosing a credit counseling firm -- there are many shady companies that try and take advantage of those in financial distress. Watch out for high setup fees, sometimes called "contributions." Check to see if the firm is listed with the National Foundation for Credit Counseling, a nonprofit organization that sets standards for and accredits legitimate counseling operations. A real counselor will help you negotiate and teach you money management strategies -- anyone claiming to be able to erase your debt or repair your credit rating overnight is most likely running a scam.
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