Unemployment Versus Debt Management

Published
11/21/2013 by goingdebtfree.co.uk

Long-term unemployment can bring stress and financial hardship, and mounting debts are one of the major worries. But there should be some debt options available that will help to ease the stress of accumulating debts during unemployment.

Make debts a priority when unemployment hits

For most people, money worries will play a big factor during a period of unemployment. Mounting debt payments can add to other worries such as finding a job and paying bills. Credit card and loan repayments are not classed as high priority debts unless they have been secured on the home. But creditors who have not been informed of a change in financial circumstances will still expect regular payments in full every month. Keeping the creditors at bay will mean contacting them immediately to make them aware of the change in circumstances.

Renegotiate credit terms with creditors

Renegotiating credit terms with creditors should result in lower repayment rates and/or frozen interest for a period of time. Creditors should be open to this option as it means they do not have to start recovery procedures. Renegotiating credit terms is not something to panic over. Simply telephone or write to the creditor explaining the financial situation and proposing the rate that you can afford. Don’t succumb to pressures from creditors to pay more than can be afforded. If possible, set out how long the renegotiated repayments are likely to last.

Don’t panic if creditors refuse to renegotiate

There will be creditors who will be less than open to renegotiating credit terms. This is often a common bluff used by certain credit companies in the hope that customers will pay more than they can actually afford. If a creditor refuses to renegotiate, then simply explain the financial situation calmly and state how much can be realistically afforded. The only option open to creditors is to call in debt collection agencies or use a court judgment. Most creditors will not want to use either of these options unless it is a last resort. Don’t succumb to pressures from creditors; a court judgment will usually mean creditors will end up with the lowest payment from debtors.

Take a stronger approach with creditors

If creditors are being unreasonable, then consider bringing in professional help. By doing this, creditors will then realise that the debtor is fully aware of their legal rights. Creditors will also be aware that the debtor is taking the matter seriously and he knows the options that are available.

Work out new repayment rates

Sitting down and setting out a budget will help to assess how much can be paid to creditors. Included in the budget should include:

• All income coming into the household including benefits

• All expenditures including all debts, household expenses, mortgage payments, transport costs

• Work out how much disposable income is left every month

• Assess how much can be paid to each creditor; this should be a minimum payment that can be comfortably afforded

• Make any secured debt a priority

• Contact all creditors in writing with payment proposals

• Enquire about the likelihood of interest being frozen for a period of time.

It may be hard to avoid but stressing over debts will not bring a viable solution. Taking a proactive approach immediately and contacting creditors to make them aware of the situation is the best solution. Unemployment is stressful enough without harassment from creditors. Customers do have legal rights and protection from creditor harassment.