How to Cope With Debt When You Are Laid Off

Deal with your lack of income quickly when you get laid off.
i Creatas Images/Creatas/Getty Images

If you’re one of the unlucky ones and your job crumbles under your feet, it’s time to dig deep and problem-solve. You’ll have a variety of issues to attend to if you lose your source of income. Be proactive to cope with debt when you are laid off. Communicate clearly and effectively with creditors to demonstrate your willingness and desire to problem-solve.

Crunch Your Numbers

Sit down and crunch the numbers as soon as possible so you know your situation. Add up your fixed expenses -- your mortgage, auto loans, personal loans, childcare expenses and insurance premiums. Any secured debts such as mortgage and auto loans have to come first when you’re paying monthly bills because you’ll end up losing your house or car if you default. Add up your variable expenses -- credit card bills, transportation, food and clothing expenses -- many of these expenses can change from month to month, depending on how frugal you’re being. Make a conservative estimate for how much you will need to spend for each expense. Check to see how much money you have in savings to figure out how long your savings will last without an income. By adding both fixed and variable expenses together, you will arrive at a total monthly expense amount. Subtract this amount from your savings to see how many months your savings will last.

Call Creditors

Creditors will often work with you if you call them immediately after being laid off if you can’t make your payments -- before you miss even one payment. Be honest and straightforward, telling each company representative that you’ve lost your job and you are searching for another job. Ask creditors for reduced or suspended payments for a period of time. If you can make your payments at least initially because you have savings, make minimum payments while you seek a new job. You won’t damage your credit as long as you’re not skipping payments. Send creditors any documentation required to reduce or suspend payments. Creditors may require that you send proof of your lay-off. Once you provide this documentation, follow-up to make sure that the payment reduction or suspension receives approval.

Get Assistance

Don’t be shy about getting help to make ends meet. Apply for subsidized health insurance or food stamps; these services could free up some cash to meet some of your monthly expenses.

Monitor Your Situation

Watch your financial situation carefully if you had savings but don’t land a job right away. If your savings dwindle, you may need to reassess and make a new plan to make sure that you prioritize the most important bills. Your No. 1 priority has to be keeping a roof over your head. Call creditors if the time comes when you can’t pay even your fixed expenses. This would be the time to ask for a “hardship program,” in which the company reduces or suspends your payments for a temporary period. Work hard to replace your lost employment, even if you can’t replace it with a position that pays as much as you made before. Try selling items that you don’t need or can’t afford to bring in some money. That boat sitting in your garage probably isn’t a need and the money you could get from its sale might keep you afloat. Resume your former payment schedule after you find another job. Call creditors to notify them of your intent to end your payment reduction or suspension period.

the nest