Dear Debt Adviser,
I’m recently divorced and lost my job. I am currently collecting unemployment benefits, which is half of what my weekly income was. I can barely afford the essentials — rent, car payment, insurance, gas and electric, etc. I have two credit card accounts that have been charged off. Would you please advise me of the best way to handle these accounts without further damage to my credit and how to handle the harassing phone calls?
— Gloria

Dear Gloria,
Getting divorced and losing your job are two major life events that can wreak havoc with a person’s finances and complicate making sound decisions. I know from personal experience because the same thing happened to me the year I turned 40. Your first priority is not worrying about the debt collectors but focusing on getting a new job. The credit card accounts have already been charged off by the original creditor and most likely sold to collectors. At this point, your credit will not get much worse unless you end up filing bankruptcy.

A bankruptcy can complicate the employment process and may keep you out of some positions that require licenses, security clearances or good credit. Besides, with only unemployment benefits, you have no money to pay. Once you are gainfully re-employed and can make arrangements to pay what you owe, your credit will improve with time.

Stopping the harassing phone calls is another story. When speaking to debt collectors, my suggestion is to remain calm and polite even when they are far from being polite. This is much easier said than done and takes some practice. Given the fact that you are currently unemployed and barely able to cover your essential bills with your unemployment benefits, you have no money to pay the collectors calling about your credit card debt. You need to let the collection agency know in a civilized conversation that you have no money to pay right now due to unemployment. To keep in control of the conversation, I suggest that you write out a script or at least the points you want to cover in your call so you don’t get off track.

Your part of the conversation should sound something like this, “I lost my job and my only source of income right now is unemployment benefits. I have only enough income to pay my rent and other essential expenses at this time. I am actively looking for a job, and when I acquire a position I will immediately call to make arrangements to pay what I owe. You are welcome to contact me again in two weeks and I will give you an update on my job status.” Take notes of the call, including who you spoke with and that person’s reaction to the information that you provided. Should the debt collector call you before the two weeks have expired, remind the person calling about the first person you spoke with and that the two weeks aren’t up yet. Remember, remain calm and polite, but firm.

If the calls become excessive or abusive, I suggest you screen your calls and don’t answer them until you have something new to say. You can write to the collectors and tell them not to contact you again. The calls will stop, but usually this just refers the account to an attorney who will send you a summons to appear in court.

To help your job search, I strongly suggest that you develop a statement for employers explaining why you have charge-offs on your credit report and that you intend to begin a repayment plan once you have a new position. Often employers will pull a credit report as part of the hiring process, and unanswered questions about bad credit can be all that is needed for the employer to move on to the next candidate. Defuse this issue early on, once it is clear you are a serious candidate.

When you are working again, you will need to determine how much you can comfortably afford to pay each month to your creditors and work out a payment plan with them. If you need help, contact a nonprofit credit counseling agency or an attorney that specializes in dealing with debt collectors.

Good luck!

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