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When you can’t afford to make your payments, then you start looking for alternatives – consolidation, credit counseling, debt settlement, and bankruptcy. However, the truth of the matter is that if you have absolutely no income to make payments or cover fees, then most of those options won’t work for you. You’ll need to get a job first, then focus on getting back to stability when it comes to your debt.
Debt consolidation
Debt consolidation rolls multiple debts into a single monthly payment that’s often lower than what you’re paying now. However, to get a debt consolidation loans, you’ll need to provide verification of your employment. Since you can’t do that when you’re unemployed, lenders are unlikely to extend loans to you.
Debt management program
If you need to lower your monthly payments, you can often go through a credit counseling agency to enroll in a debt management program. This is a repayment plan for credit card debt that rolls all of your bills into one monthly payment. That payment is typically lower than what you’re paying now, and most creditors will agree to reduce or eliminate interest charges as well.
However, you still need to have the means of making the payment every month. So, if you can’t make the monthly payment every month, this option won’t work until you secure new employment.
Debt management programs tend to work best after you get a new job and need to stop any damage you may have already caused your credit. Once you get back to a stable income, one of your first calls should be to a credit counseling agency.
Debt settlement program
Debt settlement programs are another option you may be considering. The commercials https://badcreditloanshelp.net/payday-loans-in/ claim to get you out of debt for “pennies on the dollar.” That sounds great when you only have pennies to spare and no new dollars coming in. However, the truth is that debt settlement pays out about 48% of what a borrower owes, on average. So, while you can get out of debt for less, you won’t get out of it for nothing.
What’s more, most debt settlement programs work by requiring you to pay a monthly set aside. It’s basically a low monthly payment you must make to generate the funds needed to make settlement offers. If you have no money, you can’t make settlement offers. So, even debt settlement usually won’t work while you’re unemployed.
Debt settlement also tends to work best once you get a new job. If you just want to get out of debt quickly and don’t care about the credit damage, settlement tends to offer the fastest, cheapest exit versus other solutions. It’s also ideal for debts that have already been charged off and sold to a third-party collector.
Bankruptcy
Another solution people think you can easily use when you’re broke is bankruptcy. However, bankruptcy costs more money than you might think. A Chapter 7 filing costs $335 and Chapter 13 costs $310. There may be additional fees that the bankruptcy trustee can charge when you file as well. You may also need to pay a fee for pre-bankruptcy credit counseling, which ranges from $50-$100, depending on the state where you live.
Those are the fees you’d pay without paying any fees to a bankruptcy lawyer to file. In some cases of extreme financial hardship, you may be able to waive the fees or ask to pay it back in installments. You will need to apply for the fee waiver at the time when you file.