Losing a job sucks for anyone, but when youre in debt, its even worse.
Your debt-busting goals are thwarted, or worse, youre not even sure how youll make your minimum payments.
Then theres the stress and anxiety that comes with not knowing how the bills will get paid.
There are a few things you’re free to do to make the situation less dire.
When youre desperate, its easy to get stuck in a debt trap.
Unfortunately, many people do, and they find themselvestrapped in a paycheck-to-paycheck cyclefor years.
Heres what you should do instead.
Weve told youhow to apply before, and the rules vary depending on your state.
This map will start youin the right direction.
That meanscreating an emergency budget.
If you have an emergency fund, thats great.
Youll have money to pull from during this time of turbulence.
Plus, your emergency fund is designed to fund your essentials, not your lifestyle.
Start by looking at your current budget, then take the following steps:
Cut out all nonessential expenses.
Find ways to cut fixed expenses,like your bills.
Reevaluate your debt goals (more on that later).
Be frugal with variable expenses,like groceries, fuel, and other spending.
Dont worry, this isnt your forever budget.
It should be strict, but its only meant to keep you afloat.
Adjust Debt Payments
Part of creating your emergency budget is reevaluating your financial goals.
This means youll have to adjust yourget-out-of-debt plan.
Most experts recommend you stop making any extra debt payments, in case you need the cash.
But you risk going back into debt if you run out of money.
Most creditors will have a number right on the statement, says Shore.
If you go this route, there are a handful of other factors to keep in mind.
This can affect your score.
Some programs will also put a freeze on your card.
Sometimes this freeze is temporary, but it may be permanent.
If you have student loan debt, see if you qualify for a deferment or forbearance.
With deferment, you pay your loans principal and interest at a later date.
Your interest usually stops accruing during your no pay period.
Forbearance kind of works the same way, but, interest continues to accrue during that period.
Loan modification is, as its name suggests, modifying your current loan.
Both options involve limiting your payments for a certain period and then making up for them later.
While these options arent realistic for every situation, they might be worth looking into.
Marketplacedetails these programs here.
It reduces your monthly loan payments based on your income.
There are some other pros and cons,which we outline here.
Deferment: See if you qualify for federal loan deferment at the governmentsFederal Student Aidwebsite.
you’ve got the option to thendownload the formyou need.
For private loans, youll have to check with your servicer to see if you qualify.
Home Affordable Modification Program: This is available to homeowners going through financial hardships.
You cansee if youre eligible here.
Aside from debt-related programs, theres alsogovernment assistanceforfood,childcare, and other basic living expenses.
At best, losing a job is frustrating when youre trying to get out of debt.
It throws a wrench in your plans and youre forced to reevaluate your goals.
Worse, a job loss can lead to desperate, stressful decisions.
Illustration by Tara Jacoby.
