By: kjmena

Debt recovery can be a time-consuming process when you have a well-paying job, so when you lack an income the task becomes even more daunting. Eliminating debt can be all but impossible when you no longer work. Without a steady source of income, debts can accumulate, collection calls can start and your credit score can suffer. Despite the stress that accompanies this situation, debt can be managed when you have no form of income, with the right preparation.

 

Call Your Creditors

If you find yourself with substantial debt and lacking employment you should immediately contact your creditors to make them aware of the situation. Creditors will always appreciate a proactive debtor reaching out to them before they are forced to collect. Contacting a creditor first, will allow you to work out a plan with them on your terms and help alleviate some of the stress involved.

If you plan to contact a creditor without professional assistance then remember to be clear and concise with what you want to have happen. If you approach your creditor in an unprofessional manner then there is little chance they will help you resolve your debt issues. It’s within the creditor’s best interest to talk to you since they will want to get what they are owed in some regard.

Creditors want their money at the end of the day, and they will work with you to reach their goal. Being honest with your creditors will go a long way and might even help you to settle you debts with a resolution that’s favorable to you.

Find Freelance Or Temporary Work

If you want to take your debt relief matters into your own hands you can consider freelance work until you find a steady job. Freelance work fluctuates by how often you get clients to pay you to work, but some income is better than no income. While you make money from freelance work you can at least make minimum payments on the debts you have.

This is a great option if you’ve decided to consolidate your debts. With one low payment on your debt each month freelance work can be a perfect filler between jobs. Not to mention, it could lead to a steady source of income.

Contract work can sometimes lead to full time work. Don’t be afraid to take a position if it’s a contract or temporary position as it will be a great addition to your body of work and will help you in the long run. Temp jobs can also run at uncommon hours, allowing you to handle debt related issues on a professional basis without interfering with your ability to maintain your income.

 Debt Consolidation

One way you can lessen the effects of debt during a tough financial time, is to consolidate your debts. Debt consolidation is a great way to combine what you owe into one lump payment with one interest fee. The best time to begin debt consolidation is directly after you stop working. Waiting too long afterwards might see your credit score drop and make it harder for you to acquire a debt consolidation loan.

Debt consolidation works by having you receive a loan from a lender to pay off all of your existing debts. You, in turn, you pay off this loan with a single payment every month. A debt consolidation usually has a lower interest rate than your previous debts and allows you to pay all your debt with one monthly payment.

In order to receive a consolidation loan, you must have good credit. Although this method does narrow down multiple payments into one monthly payment, your principle amount of debt will stay the same and will still need to be paid in full.

 

Debt Settlement

As opposed to debt consolidation, debt settlement is another option you have to handle your debts while you’re out of work. Instead of combining your debts under one loan, you allow a debt settlement company to negotiate with your creditors, in order to reduce your debt to an amount you can afford. This could help you reach complete debt relief faster.

Debt settlement connects you with a debt relief specialist who will help you weigh your options toward debt recovery. Upon settling on debt settlement you would then start making deposits into a secure escrow account. Your debt settlement specialist would approach your creditors with the intent of lowering debt amount. This method of debt relief can have your debts eliminated in as little as 24 months.

This option will still have you making monthly installments but just at a lower amount and with the end goal of reaching debt freedom.

 

Bankruptcy: Chapter 7 vs. Chapter 13

 

Some people who end up falling on hard times turn to filing for bankruptcy as a way to deal with debt. Most people consider this option when their debt has gotten so far out of hand that they can’t handle it on their own. Without a job to bring in income, debts can lead to adverse marks on your credit report and creditors looking to collect. Bankruptcy helps by eliminating your debts or working to eliminate your debts. The method of bankruptcy for individuals differs between Chapter 7 and Chapter 13.

 

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is a method to  deal with debt that works to remove all debt from the filing individual. Debts that are removed are mostly unsecured, i.e. credit card debts and private loans, while secured debts like school loans and child support payments remain. In a chapter 7 bankruptcy it is possible to have your assets taken in order to satisfy existing debts. While most individuals who need to file for this type of bankruptcy do not have assets that would satisfy these debts, chapter 7 bankruptcy comes with damaging effects to your credit report.

If you have no form of income coming in at all, filing for chapter 7 might be the best thing to do. Without a way to make monthly payments, having all of your debt erased gives you a fresh slate to start over.

Just remember that you pay a heavy price on your credit report for ten years because of it. Also, once you’re past bankruptcy it’s important to establish better habits to deal with debt, as there is a period of time that you won’t be able to file for bankruptcy again.

 

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is different from chapter 7, in that it doesn’t require you to give up any assets at all. In exchange, you set up a payment plan to pay off your debts over the course of three to five years, depending on your income. Other factors may also have an impact on your bankruptcy experience, such as your regular income and the value of the assets you possess.

People who still have monthly income or don’t expect to be unemployed for too long would find this option ideal. An individual filing for chapter 13 bankruptcy can afford to make payments, but cannot afford to give up assets or can’t make a large enough contribution to deal with debt.

Looking to deal with debt without a steady income is a tough time. While filing for bankruptcy can solve a lot of your debt problems, it can also create them too. Make sure you take your personal situation in consideration before making any snap decisions. Consult your creditors, try to find yourself another form of employment and look to begin a form of debt relief. Bankruptcy should be the very last option you take towards debt elimination and should not be made lightly.

Seek Professional Assistance To Deal With Debt

If you have any questions at all about how to deal with debt, consider contacting a professional debt relief consultant. Consultants like the ones at Guardian Debt Relief can help provide you with the information you need to make the best decision for your financial future. Even if you don’t have a steady form of income, take control of your finances and actively seek professional help. Take the first step towards debt freedom.