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 Dear
Debt Adviser,
I just got laid off from my job. I never missed
or have been late with a payment in about 13 years. I have several credit cards
and owe a total of about $24,000. I want to be responsible for what I owe. I don't
want to declare bankruptcy. Also, I can make the minimum payments on some of the
cards and would want to keep at least one for emergency purposes only. Is it possible
to get them to lower my minimum payments until I get back on my feet without "freezing"
all my credit? Thanks.
-- Dan
 Dear
Dan,
You are not alone. I personally went through this meshugass*
four times. By the second time, I figured out a few things. By the fourth, I was
getting pretty good at making the best out of a really miserable situation.
I'm
going to assume that if you stopped using cash for living expenses, you could
make your minimum payments on your credit cards. Based on that assumption, your
goal during this difficult financial time is to minimize expenses and protect
your cash by using credit. Yes, this is unexpected advice
from the Debt Adviser, but I recommend you use your credit cards to tide you over,
but only in the short term, and only for essentials -- and that includes living
expenses. This is almost the opposite advice that working
people are given. But you aren't working, hence the difference. Using credit will
protect your irreplaceable cash and allow you to continue making minimum payments
for a longer period, thus protecting your credit rating. Unless you have a big
stash of the green stuff somewhere, it is important not to exhaust your supply.
If you run out, you may have to use cash advances, which are hugely expensive
and will increase your risk profile. Remember, this is a short-term
solution while you are looking for a job. Once you are back on your feet, get
those credit cards paid off as fast as you can! Look at your
monthly expenses and cut them to the bare bones. You may have already done this,
but take another look and make sure you haven't overlooked anything. Then, get
a copy of your credit report and make sure it looks as good as it can. Dispute
any out-of-date or inaccurate items. A positive credit report is an important
job hunting tool. Many employers get a copy of your credit report as a part of
their pre-hiring background check. It would be best for you if you can keep
your report looking good and stable. Often, employers will not ask why your credit
report is terrible; they will just move on to the next candidate. Often
I advise communicating with creditors, but don't be too quick about it. Your job
loss situation is none of their business unless you can't make payments. Call
or write them only when you know for sure that you will be unable to make a payment.
If you are unable to make all your payments, ask your creditors for a hardship
program that will allow you to make lower payments. Hardship programs typically
last only three to six months. If you are still unable to
make the payments required under the hardship program, or the creditors will not
enroll you in one, it's time to let them know you can't pay until you secure another
job. Consider visiting with a reputable
credit counseling agency for help at this point. If you prefer to do it on
your own, communicate in writing with your creditors and let them know you are
unable to pay the monthly amount required in the card agreement, but that you
intend to resume paying as agreed as soon as your situation is resolved. It
is likely that most people in the working world will experience a layoff or other
involuntary job change sooner or later. Here are some other
things I've learned that may help others in this situation. Dealing
financially with job loss - Build up savings for the next
time. Six months of living expenses is still a good number to shoot for.
- Don't
carry large balances on your credit cards and never for more than 90 days.
- Bankruptcy should be a last resort.
- Consider
visiting with a reputable credit counseling agency.
- Don't
let it drive you crazy. This too shall pass!
Good luck! *
Madness or insanity. (Source: Michael Fein, Yiddishkeit) | 
