How to Work Out Credit Card Debt When Unemployed

Unemployment is a frightening time, especially if you do not have an emergency fund. With money tight and no income coming in to keep everyone fed and the lights on, prioritizing what must be paid in order to survive becomes the top priority. Typically, credit card debt is not on that list of essentials. Working out credit card debt while unemployed is not impossible, but your lenders do need to see that your financial hardship will affect them and that you are willing to negotiate.

Instructions

1

Trim and prioritize your budget. Stop spending money on things you can live without, like cable TV, and find ways to purchase groceries and other necessities more frugally until you are gainfully employed again. Pay your bills in the following order until your month's allotted money is gone: the rent or your mortgage, utilities, groceries, car payments, student loans (though it is recommended you immediate seek a forbearance) and finally your credit cards.

2

Forgo paying even your minimum credit card payments for two to three months. This will hurt your credit score, but most companies will not be willing to seriously attempt to help you until you have defaulted on your payments for at least a few months.

3

Assess your budget once again and write down how much money you can put toward your debt each month while unemployed. This is the total amount you must get all of your credit card lenders to work with you to pay each month until you are once again employed.

4

Call your credit card lenders. Explain that you are unemployed, which is why you have not made your minimum payments for the past few months. Ask if there are any programs for which you qualify.

5

Accept the offer that gives you the best chance of surviving your employment. Some companies offer lower interest rates and minimum payments for up to six months for financial hardship situations like unemployment or disability. Another option the company may offer is reduced payments over a longer period of time to pay back your debt. In more extreme cases, if you can make a lump sum payment for 40 to 70 percent of the total debt, the lender may offer to settle your debt for that reduced amount and call it even. Select the option that gives you the most cash on hand and inflicts the least amount of damage on your credit score.