You’ve been laid off, and credit accounts you may have first opened in college are at risk of becoming delinquent. You may be dreading calling your creditors to explain the situation. But take heart: Creditors have reasons to work with you. It’s expensive and time-consuming for them to hire debt collectors and file lawsuits to recoup delinquent debts. That’s why your creditors may prefer to offer you a solution directly, rather than taking more drastic actions to collect what you owe.
Banks must write off credit card balances as bad debts if cardholders fail to make payments for six months, according to ConsumerReports.org. Creditors can try to recover bad debts through collection agencies, but collectors often recoup much less than what cardholders owe. In contrast, creditors often can get most, or all, of a debt repaid when they help unemployed customers by offering repayment options (such as reducing their monthly payments and lengthening the repayment period).
Make a Plan
Add up your monthly expenses. Figure out how much you’re able to pay your creditors before you tell them you lost your job. They may agree to lower your payments if you have a detailed repayment plan. Unfortunately, your job loss makes you a bigger credit risk. So, expect some creditors to reduce your credit limit even if they agree to lower your monthly payments.
No Cash to Spare
If you won’t be able to pay anything while you’re unemployed, ask your creditors if they have a hardship program. Some companies suspend their customers’ payments for a few months through these programs. Ensure you understand the program terms, because some creditors may close your account after they suspend the monthly payments on your remaining balance.
Procrastination can work against you when you need to renegotiate payment terms with creditors after a job loss. Creditors are sometimes more willing to work with customers who seek help before they fall behind on payments. You’re less likely to convince your creditors to give you a break if you regularly pay late or are already several months behind on payments.
Frances Burks has more than 15 years experience in writing positions, including work as a news analyst for executive briefings and as an Associated Press journalist. Burks has banking and business development experience, and she has written numerous articles on consumer issues and home improvement. Burks holds a bachelor's degree in political science from the University of Michigan.