How to Get Out of Debt When You Don't Have a Job

Getting out of debt while unemployed may be difficult. Some people who are unemployed find it hard to cover necessary living expenses such as food and shelter. Others who are able to pay for necessities find that there is simply not enough money left to pay down debt, or to even make monthly payments. Telling your creditors about your unemployment could give you more time to find a solution for getting rid of the debt. Some creditors have hardship plans allowing payments to be reduced or even suspended while you are out of work.

Instructions

1

Contact a nonprofit credit counselor approved by the U.S. Department of Housing and Urban Development (HUD). Find a counselor near you by checking the HUD website. Choose a counseling agency listing financial management as a specialty.

2

Tell the counselor about your employment and your desire to get out of debt. Discuss your debts as you ask the credit counselor for advice on approaching your creditors for hardship consideration. Or authorize the credit counselor to contact creditors on your behalf. The Federal Trade Commission reports that counseling agencies offer debt management plans allowing the agencies to manage many of your monthly bills, such as credit cards. The agency contacts your creditor to negotiate lower monthly payments, reduced interest rates and a waiver of some fees.

3

Pay off some debts through debt settlement -- if you have enough cash in reserve to make lump-sum payments and still cover your living expenses. The SmartMoney website reports that credit card companies may settle delinquent accounts for 20 to 75 percent of the balance, meaning you could pay off a $1,000 credit card bill for as little as $200. Ask for a settlement by calling the customer service number of your credit card company. However, SmartMoney reports that the card companies won't discuss a settlement until you are at least three months behind.

4

File for bankruptcy as a last resort. Chapter 7 bankruptcy allows you to eliminate all unsecured debt, such as credit cards, within months. There are income limits for Chapter 7 that vary by the state, but you may qualify because of your unemployment status. Chapter 13 bankruptcy is another option, but requires a payment plan of three to five years. Chapter 11 bankruptcy is much more complicated and expensive than other forms of bankruptcy, according to the website Bankrate. The website reports that Chapter 11 is used mostly by businesses and wealthy individuals.