When you lose your job and the income stops coming in we all know that the bills don’t stop arriving in your mailbox. And if you are like most American’s you were probably using credit a little too much during the “good times”. Even if you weren’t abusing credit, getting a little relief on your monthly bills during unemployment can certainly be a positive thing.
You need to contact all of your creditors as soon as you know that your income will be diminished. DO NOT GET BEHIND in your payments. By being pro-active with your creditors and showing good faith, they may be more likely to work with you on some type of relief.
But before you call them, have a plan. This is just like any negotiation… you need to know what outcome you would like to have (the optimal outcome) and also an acceptable outcome. Be realistic and work some scenarios before you make the call.
When you talk to your creditors, don’t agree to any plan just so that you have a plan. Make sure that you will be able to follow through on the agreement. The agreement has to be acceptable to both you and the creditor.
Here are some alternatives to consider when negotiating with your creditors:
- Reducing the monthly payment
- Refinancing the loan
- Deferring a payment for a short time if you expect to get called back to work soon
- Reducing or dropping late charges
- Paying interest only on the loan until you can resume making monthly payments
- Voluntarily surrendering or giving back an item purchased on credit
- Selling the item and using the cash to satisfy, or partially satisfy, the debt
Not all creditors will be willing to accept alternatives. However, they’ll be more likely to work with you if you contact them before they contact you. They all want their money and would rather get some money on a regular basis than have to begin collection procedures.
If you fail to follow the plan that you and your creditor agreed upon, you will hurt your chances of getting future credit. Tell your creditors about any changes that may affect your payment agreement.
If you owe a large amount of money, and if your creditors won’t accept reduced payments, you may have to consider more extreme alternatives such as bankruptcy.
Here is a link to a PDF file that might be helpful: http://learningstore.uwex.edu/pdf/B3459-4.pdf
Robert Shindell, The Career Doctor