Laid Off and the Bills Keep Coming

If you need to deal with creditors and get out from under a mountain of debt, take action early and don’t delay communications with creditors or others involved. Acting quickly and sensibly is essential for survival and long-term financial recovery. Establishing a written plan of action for both household spending and debt reduction is also crucial to your financial survival and recovery.

What actions should you take?

Take positive steps in order to reduce the negative impact of adjusting to a lower income lifestyle.

Develop new spending priorities and techniques to make less income go farther. This is an acquired skill, but you can achieve greater value for your money, especially in household and grocery spending. Use coupons and take advantage of rebate offers.

Work directly with your creditors; this will help you avoid making the same mistakes again. Take the first step by contacting all creditors, preferably ahead of time if you know an income reduction is pending. Explain what's happening and lay the groundwork for a temporary reduction of payments. Have your plan ready. Tell how much you can afford to pay and how often you can pay it. Then be ready to negotiate.

Letting credit and debt counselors do the work with creditors for you can be less stressful, but it also may be expensive due to fraud and scams. If you select a credit counseling agency, make certain they are an accredited, nonprofit agency with a long successful track record of helping consumers.

Getting out of debt (and rebuilding credit) is a somewhat slower, step-by-step process. Avoid more borrowing just to pay someone else off. Sometimes a consolidation loan improves cash flow, but ultimately it is added debt and that may have a negative impact on credit files. What your credit files might say about you in future years is your responsibility. Taking positive action with all creditors early may stop negative reports from being sent to credit reporting agencies.

This article was submitted by the Institute of Consumer Financial Education, whose Web site provides financial education for all age groups with a special section devoted to teaching children about money.

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