How To Avoid Debt If You've Lost Your Job

Losing your job can leave you in a state of shock and confusion, and it’s hard to know what to do next. The entire world may feel out of balance, especially with the difficulties we’re experiencing due to Covid-19. However, one thing you can do to safeguard your future (as well as looking for a new job) is to stay out of debt.

If you have lost your job, you’re not alone. India, the United States and the United Kingdom have all seen big spikes in unemployment due to the effects of the pandemic. Avoiding solutions which bring short term relief but long term, added trauma, such as taking out loans which you won’t be able to afford, will keep you afloat financially.

If you take out loans which you can’t repay, you may end up in worse financial trouble, getting chased by debt collectors such as Capquest financial , and equivalents in India and the US. Keeping out of debt may sound tricky when you’ve lost a regular source of income, but there are several things you can do to avoid it.

In this article, we’ll go through exactly how to stay out of debt if you’ve lost your job in India, the United States and the United Kingdom, and the financial support you can access. We’ll also explore the support that exists in each country if you’re already struggling with debt.

How can you avoid debt if you’ve lost your job?

You can avoid debt if you’ve lost your job by signing up to any financial assistance that you’re entitled to, making a budget to cut down unnecessary expenses, and making sure you get the right amount of redundancy pay.

You can also avoid debt if you’ve lost your job by refusing to take out new loans, and prioritising payments such as your rent and mortgage.

Let’s dive right in, and look at how to avoid debt if you’ve lost your job if you’re a citizen of India, the United Kingdom or the United States of America.

India

Like the rest of the world, Covid-19 has had a serious effect on India’s employment. More than 4 million Indians under 30 have lost their jobs, and many are feeling the pinch of having to take on far worse paid jobs, or struggling without a job at all.

90% of India’s workforce who work in informal jobs (such as temporary workers, day labourers and domestic workers) have been most seriously hit. Three quarters of the 122 million people who lost their jobs in April 2020 alone worked in the informal sector).

If you’re in this situation, you’re not alone. The best thing that you can do is carefully consider your financial situation, and plan your next steps, so that you feel more in control of your life and circumstances. Avoiding debt is one of the most important things to do. Although a loan may provide some short term relief, interest rates and late payment fines will spike quickly, especially if you don’t have a consistent salary to pay them off. Be especially careful to avoid unauthorised microlending apps, which loan sharks are using to entice people who need quick access to cash into loans with exorbitant interest rates. They use cash recovery methods which bring “immense disrepute and mental agony to borrowers, some of whom have been driven to death”, according to the Times of India.

Six steps to avoid debt if you’ve lost your job

Check your employment contract

You may be in a state of shock if you’ve just lost your job due to Covid-19 or any other reason. Take a breath, and go and read your employment contract. This could be the difference between staying out of debt while you find a new job, or spiralling into unaffordable debt.

In your employment contract, you will find details explaining what circumstances a person can be fired from their job. If these are at odds with the reasons your employer has given you, you may be able to argue your case and retain your job. If your company tries to make you leave in violation of your contract, you can sue them.

Most importantly of all, check the financial benefits your company offers in the case of a job cut. Make sure you get an official letter from your organisation confirming these benefits. You can use this financial package to keep up with your rent, loan instalments and vital payments for a few months, and avoid debt.

Be especially careful if your employer tries to encourage you to resign on your own. There have been several cases where employment contracts state that an employee is only eligible for part payments if they resign on their own, whereas if they are sacked, they are entitled to at least three months of pay. If you see in your contract that you’ll lose out financially by resigning on your own, don’t do it. You have the right to all money that is due to you, and you will need all of it as you look for a new job.

Prioritise your rent, bills and insurance plans

One of your first priorities is to work out which of your financial commitments are the most important and which you need to continue paying. Obviously, the rent or loan on your home is a big priority, as well as insurance premiums that will lapse if you don’t meet the payments.

Unfortunately, in most cases in India, you won’t be liable for rent relief due to Covid-19. It may be tempting to avoid paying your rent if you’re short on cash, but not doing so could seriously worsen your financial situation: for example, if you’re evicted for not paying rent and find it hard to get another place to live.

Instead, discuss with your landlord about getting a rent waiver or organising deferred payments (preferably to be paid back in affordable instalments). Reaching a solution with your landlord can be really beneficial

As a tenant, your landlord:

Can only issue an eviction notice after three months of non-payment of rent
Must give you 6 months breathing time to pay the rent after issuing the eviction notice. If you make the payment during this time, you cannot be evicted.

(Always check the tenancy laws in your state for the most specific rules in your situation).

Manage your loans

If you’ve got a car or home loan you’re paying off, it is important that you try to manage the payments on these too. This will keep you out of debt, and stop interest spiralling out of control on unpaid balances.

If you have a home loan, you can ask your bank if they can give you a temporary EMI holiday, if you can’t make the payment due to unemployment. However, you should always check if interest will accrue on your loans and whether you can actually afford this once the EMI holiday is over.

You could also see if you can reduce your EMI amount by increasing the length of the loan. This would mean you have less to pay back each month, although you may end up paying more interest given the longer period of the loan. However, if you don’t think you’ll be unemployed for long and will have the funds to finance EMI holidays or reductions, this can help you free up some cash.

Loan restructuring

The Reserve Bank of India (RBI) has now stopped its Covid-19 EMI holidays, but you can access loan restructuring via the RBI if you’re eligible.

Loan restructuring is where both the lender and borrower agree to alter the terms of the loan, usually to make it more favourable to the borrower, for example, with lower interest rates or payment amounts.

If you reside in the US and are age 62+, consider a federal reverse mortgage which can eliminate existing mortgage payments, or even provide a new income source using your home’s equity as collateral. TIP: research rates and fees much like you would with a conventional mortgage. Consider the costs and weight the pros and cons. If you decide the reverse mortgage is right for your circumstances start by comparing reverse mortgage providers.

Under the RBI, you can restructure your loan to access a further EMI holiday of two years. To be eligible, you’ll need to show that your ability to pay your loan has been seriously impacted by Covid-19, for example, through losing your job. Your loan cannot be overdue by more than 30 days as of the 1st March 2020, or you won’t be eligible. You can take termination letters, pay cut letters or bank statements to your bank as proof of your right to a loan restructure. Obviously, EMI holidays are not ideal because they are still a form of debt, but if you already have loans that you feel unable to pay, they may be a better choice than simply defaulting on payments and getting in serious trouble.

Create a budget

Creating a budget of your incomings and outgoings, and cutting down on any unnecessary expenses is a great step to getting back to financial security, and avoiding debt. Necessary expenses are your rent or mortgage, taxes, insurance and groceries. Non-necessary expenses are ‘wants’: entertainment, meals out, gym memberships etc.

Track every rupee that leaves your account, and see where you can make savings to put towards your vital expenses as you look for a new job.

We understand that this is tough, especially if you’re used to a certain lifestyle. However, with little or no new money coming in, avoiding credit cards and other loans to finance your former lifestyle will put you back in control.

You can find many ways to cut down on your household bills, especially electricity bills, which are some of the highest.

Look for a new job

As well as sorting out your new financial situation, one of the quickest routes to avoiding debt if you’ve lost your job is to get a new one. We know how tough it can be to lose a job, especially in the painful economic situation of Covid-19, but the sooner you draw in new sources of income and new employment, the stronger you’ll be financially.

LinkedIn is the largest jobs networking site in the world, and one of the first things you need to do is update your profile there, or create one if you haven’t already. Register with job agencies, and upload your resume on relevant job websites (make sure they are legitimate and not scams).

Reach out to your network, whether they are family, friends or former colleagues, and see if there are any opportunities available. With the pandemic changing everything about the way we live and work, there is a greater focus than ever on sectors like tech. You can take advantage of free online courses to learn new skills, while you’re looking for new jobs. As soon as you take action, you will grow in confidence and feel better about your job situation.

Financial Support for unemployment

The government has extended their unemployment relief payment scheme Atal Beemit Vyakti Kalyan Yojana (ABVKY) from another year, until the 30th June 2021. If you’re eligible, this is absolutely something you should take advantage of, given the financial struggles that Covid-19 has caused. You’ll receive a relief payment of 50% of your wages for 90 days, once in your lifetime. To qualify, you must have been in insurable employment for a minimum of two years before you became unemployed. Relief should be available after 30 days from the date of your unemployment.

You can submit your claim here on the ESIC website.

You no longer have to worry about submitting your claim in physical form, if you’ve uploaded your documents online.

Ration cards

One of the most devastating effects of Covid-19 is how it has worsened hunger. Despite expectations for a record harvest in 2020, the need for nationwide lockdowns in India due to the pandemic has seriously affected food supply chains.

If you’re a legal Indian citizen, you can apply for a Ration Card to give you subsidised access to food if you meet certain requirements. India Today has published a useful guide for applying for your ration card online.

There are also a number of charities working in India to support unemployment, especially during Covid-19. These include Technoserve, which works specifically with farmers in agricultural areas to survive the effects of coronavirus.

Already in debt? Here are some options

Credit counselling

Struggling with debt, whether it’s credit card debt or housing loan arrears, can feel really isolating. However, you’re not alone and there are organisations to help. Credit counselling agencies like Abhay by the Bank of India, and Disha counselling centre by ICICI Bank will counsel you for free if you’re struggling to make repayments.

Debt counsellors will often negotiate with creditors on your behalf, easing the strain on you and helping you work out a reasonable payment plan to come out of te debt trap. The debt counsellor will make a note of all your debts, and then create a household expenditure budget which helps you save as much money as possible to put towards your debts. You’ll gain a lot of wise advice in how to prioritise your bills and debts (rent arrears, for example, are a priority debt as paying them keeps a roof over your head).

Filing for bankruptcy

Choosing to go bankrupt is a very serious decision, and not one which should be taken lightly. If your bankruptcy is accepted by the court, you can then get a stay order against your creditors, which means they are prevented from making further recovery attempts. Filing for bankruptcy usually means that, once the process is completed and any assets divided among your creditors, you’ll be discharged from your bankruptcy by the court, and be free to make a fresh financial start, without being hounded by your previous creditors. You can file for bankruptcy if you owe more than 500 rupees.

United Kingdom

Losing your job, especially in the middle of a global pandemic, can feel absolutely devastating. If you’re feeling anxious or upset, this is totally understandable. If you have lost your job due to Covid-19 or any other reason, you’re not alone and many people will understand what you’re going through. Unemployment is predicted to reach 2.6 million in the UK by the middle of 2021 – that’s 7.5% of the working age population.

Perhaps the last thing you want to do is make sense of your financial situation, but as soon as you do this, you’ll feel much better and more control. It can be tempting to bury your head in the sand or use credit cards or other loans as a means of short term relief. However, if you can come out of your unemployment period debt free, you’ll be far stronger financially, rather than sinking due to spiking interest rates or late payment fees.

Six steps to avoid debt if you’ve lost your job

Know your redundancy rights

Finding out you’ve been made redundant can be a big shock. Take a breath, and make sure you read your employment contract. If there are conditions for redundancy on your contract that your employer is not meeting, you may be able to challenge the redundancy. Visit the ‘check if your redundancy is fair’ page on the Citizens Advice Bureau website.

If you’re being made redundant, you may be eligible for:

Redundancy pay.
A notice period
Paid time off to find a new job
The option to move into a different job

It is worth exploring all of these options in detail, so that you can get as much as you can out of your redundancy and avoid falling into debt.

Redundancy pay

You can get 2 types of redundancy pay. ‘Statutory’ redundancy pay which the law says you’re entitled to, and ‘contractual’ redundancy pay, which is any extra money your contract says you can get on top of the statutory amount. With statutory redundancy pay, you’ll get:

Half a week’s pay for each year you were under 22
One week’s pay for each year you were 22 or older, but under 41
One and half week’s pay for each full year you were 41 or older

Notice periods

You are entitled to a notice period before your employment ends. These are:

At least one week’s notice if you were employed between one month and 2 years
One week’s notice for each year if you were employed between 2 and 12 years
12 weeks notice if you were employed for 12 years or more.

Make sure you check your contract to ensure that your employer isn’t giving you less than the statutory minimum notice period. You can use this time to look for new jobs and sort out a plan for your financial future.

Paid time off to get a new job

If you’ve worked continuously for your employer for at least two years, you’re entitled to up to 40% of a week’s pay to cover your time off. This should give you some financial support while you look for new jobs.

For instance, if you work a five-day week, you can take two days off in total to attend interviews, and your employer has to pay you for this.

Your employers may be more generous with this, particularly if the redundancy was out of both of your control, so you should discuss this with them. If you can, maintaining a respectful and civil relationship on both sides is a good idea, as your employer may be more willing to support you more than just what the law demands.

The option to move into a different job

Sometimes, your employer will offer you ‘suitable alternative employment’ within your organisation or an associated company. Your redundancy could be an unfair dismissal, if your employer has suitable alternative employment and they don’t offer it to you. Check the Gov.uk website for further details.

Check if you’re eligible for financial support

If you’ve lost your job, one of the first things to organise is financial support in the form of benefits, if you’re entitled to them. You can use a free benefits calculator to work out which benefits you can get. Redundancy payments under £6,000 don’t usually affect the amount of benefits you’ll get (as they’re treated as savings), but always check your personal circumstances with Universal Credit or any other benefits agency.

To apply for benefits, you’ll need details of your:

Savings
Income
Pension
Childcare payments
Existing benefits

You may be eligible for:

New-style jobseekers allowance
Universal Credit
Housing benefit (or the housing element of Universal Credit
Help with council tax payments

If you’re underemployed (for example, you’ve lost your job and are now working a minimum wage job), you can still receive Universal Credit. This may help to tide you over and avoid you getting into debt for different expenses. For every £1 you earn, your payment reduces by 63p.

If you’re self-employed or a sole trader, you may be eligible for a grant through the government’s Self-Employment Income Support Scheme. This will give you 80% of your average monthly trading profits, paid out in a single instalment, covering 3 months’ worth of profits, and capped at £7,500 in total.

Make a budget

Many things will have changed financially for you if you’ve lost your job, but not the need to keep track of where your money is going. You will still have rent or mortgage payments to make and bills to pay, and keeping up with these is the best way to avoid going into arrears (late payments) and debt while you’re unemployed. Your rent or mortgage payments are your priority bills, before credit cards or any other loans, as they keep you from homelessness.

You may wonder how you can do this if you no longer have a regular source of income. What you’ll need to do is identify any money you have coming in, whether that’s in the form of benefits, or taking money from savings or redundancy payments each month (while you’re looking for a new job) to pay for your vital expenses such as mortgage / rent, electricity bills and groceries. Always check if you’re eligible for benefits, rather than just living out of your savings or redundancy pay.

You should also make a list of the non-essential outgoings you usually have, and cut them down as much as possible. I know this can feel really difficult, but the temptation to get through your unemployment period by overspending on entertainment and eating out could land you in debt faster, as you’ll use up vital savings. Consider this as an investment in your future – you’re looking after yourself in a sensible way through a difficult period, so that you can emerge in a better position.

You can also cut down significantly on your gas and electricity bills, to keep your savings or redundancy funds going for longer while you look for new employment. Visit sites like uswitch.com to compare different energy providers, and find the cheapest.

Avoid taking out loans

The temptation to take out credit just to ‘tide you over’ until you find another job can seem really attractive. However, to avoid going into debt, which can affect you physically and mentally for a long time (particularly if it becomes impossible to pay) try to avoid loans at all costs. Most credit cards and ‘buy now pay later schemes’ will lure you in with 0% interest periods, but end up charging you a huge amount once the interest free period is over.

There is nearly always a better option than going into debt, whether that’s through council support for food and clothing, or support with budgeting and accessing financial support, through charities such as Christians Against Poverty and StepChange.

There may be situations where it feels impossible not to buy things on a credit card. What if you’ve got kids and your fridge-freezer or washing machine breaks? However, local councils do offer grants for situations like these. Check out the Turn2Us website’s ‘search for grants page’.

If you’re struggling to pay for food, find out how to get help from a food bank on the Citizens Advice Bureau’s website. If you’re at least 10 weeks pregnant or have a child under 4 years old you might be able to get free vitamins and Healthy Start vouchers for milk, fruit and vegetables and infant formula milk.

If you’re already struggling with a lot of debt, you’re not alone, and there is help out there. Don’t take out any more loans or credit cards, and try not to increase your overdraft as this will simply add to the problem.

You should also be careful not to take out debt consolidation loans. Although these loans may help you in the short term by paying off your original debts and transferring them onto a loan with potentially lower interest and a longer repayment term, there are often added costs and fees in these loans which may end up costing you more. Not only this, but you’ll end up paying more interest in the long run (if you can keep up with repayments in the first place). Christians Against Poverty and National Debtline offer free support with debt, so you can consider your options and start your journey to becoming debt free.

Think carefully about mortgage holidays

The government has issued mortgage holidays for homeowners due to Covid-19. If you’re struggling to pay your mortgage due to coronavirus, you may have applied for a mortgage payment holiday for up to six months, where you can pay nothing or reduced amounts. However, you should be aware that a missed or reduced payment won’t be wiped off your debt, and you will have to pay it all back at some point. You’ll also be charged interest on your debt while you’re not paying. So, if you have chosen a mortgage holiday, arranging a reduced payment is better than no payment, as you’ll lessen the amount of interest you have to pay,

Look for a new job

Looking for a job when you’re unemployed may sound obvious, but the shock of sudden unemployment can push us into apathy. We may lose confidence, even though the redundancy is unlikely to be our fault, especially in the current financial situation of Covid-19. However, the sooner we get down to looking for a new job, the closer we get to securing a consistent income again, and staying debt free.

Make sure you keep a routine when you’re unemployed, just like you would at work. Make a list of things you need to do, both job-search related and other, and break your day up into chunks of time, during which you will accomplish a task. If this feels too overwhelming, break the tasks into steps until each one feels manageable. The Pomodoro method (25 minutes of work and 5 minutes of rest) is a great way to kickstart your productivity,

The Department of Work and Pensions (DWP), who organise Universal Credit, offer job search support for claimants. If you’re claiming Universal Credit, get in touch with your work coach for as much support finding a job as possible.

Already in debt? Here are some options

Individual Voluntary Arrangement (IVA)

An Individual Voluntary Arrangement (IVA) is a government approved debt help scheme, which helps you if you’re struggling to repay your debts. With nn IVA, you’ll pay back a small percentage of your total debt, and get the rest of it written off. At the end of the IVA (which runs for 5-6 years), no matter how much money you have left to pay back, the debt gets cleared. You will make small, monthly payments towards your debt, based on what you can afford. IVA Advice offers free, qualified advice on whether you are eligible for an IVA, and how to get started on one.

Debt Management Plan (DMP)

A DMP either through a charity or a debt management company, allows you make reduced payments based on what you can afford, and freezes the interest on your debts. This stops you having to pay increasing interest on your debts, opening up the path to freedom from debt.

Charities like Christians Against Poverty offer free debt management plans.

Debt relief Order (DRO)

If you owe less than £20,000 in total and you have very no valuable assets, you could get a Debt Relief Order. This is a personal insolvency process which gives you legal protection from your creditors, and writes off your debts after one year.

The United States

If you’ve lost your job due to Covid-19 or any other reason, it can be a really shocking experience. Job losses have soared in the US to over 40 million, and by June 2020, leaving many people without a secure source of income. 7.7 million workers had lost jobs with employer-sponsored insurance. If you’re feeling anxious or unsure of what to do, you’re not alone, and there will be many people who understand how you feel. There are several things you can do to take control of your situation and start getting back on your feet.

Probably the last thing you want to do after your job is take stock of your financial situation. However, as soon as you do this, you’ll feel much more in control and aware of what your steps are for the future. Although taking out credit or a loan can sometimes feel like a tempting solution when you’ve lost your job, this can lead to far worse problems with soaring interest rates and fees, especially if you can’t afford to repay the loan.

Six steps to avoid debt if you’ve lost your job

Know your redundancy rights

Finding out that you’ve been made redundant can be a huge shock. Take a calming breath, and read your employment contract, to make sure that you get what you’re entitled to out of your termination. This will help keep you afloat as you look for new work. If there are conditions on your employment contract that your employer is not meeting by making you redundant, this may be a wrongful termination, and you may have legal recourse to challenge it. Visit the USA.gov website for further information.

If you’ve been made redundant, you may be eligible to rights including:

Severance pay
Notice period
Job loss and healthcare benefits
Unemployment benefits

Severance pay

Severance pay is money you’ll get from your employer, after your employment is terminated. The amount you get is usually based on how long you’ve worked for your employment. There is no requirement in the Fair Labour Standards Act (FLSA) for severance pay, and it is down to an agreement between an employer and an employee. If you haven’t received severance benefits under your employer-sponsored plan, the Employee Benefits Security Administration (EBSA) may be able to assist you in getting these.

Notice period

While there is no federal law that requires a company to issue any warning or notification of termination, the WARN Act does require employers of more than 100 employees to provide notice. Many employers do provide a termination notice, though, and you can use this period to look for new jobs.

Job loss and healthcare benefits

If your employment is terminated, you and your family may still have the right to continue using your group health benefits on your group health plan, for limited periods of time. It is important to check if you can still have access to these, as protecting your health is of upmost importance, especially when trying to avoid debt. If you need more information on health insurance coverage after you’ve lost your job, see the Family Medical Leave Act (FMLA)

Apply for unemployment benefits, and look into grants

If you’ve lost your job and it’s not your fault (for example, your company can’t keep you due to the pandemic-related losses), you’re eligible for unemployment benefits. You should get paid unemployment benefits for up to 26 weeks, at roughly 50% of your salary.

If you’re unemployed due to Covid-19, you may be eligible for government relief programs such as Federal Pandemic Unemployment Compensation (FPUC) or Lost Wages Assistance (LWA). Check out this useful guide for how to file for unemployment insurance.

President Trump recently signed an agreement extending the FPUC for a further 11 weeks, which will cover weeks of unemployment between December 27th 2020 and March 13th 2021.

Some states, local government and non profits have started offering individual grants to assist with the Covid-19 outbreak. If you’ve lost your job recently, you may be eligible for one of these, so it’s worth looking into.

Create a budget

If you’ve lost your job, you need more than ever to keep track of where your money is going. You will still have rent or mortgage payments to make and bills to pay, and keeping up with these is the best way to avoid going into arrears (late payments) and debt while you’re unemployed. Your rent or mortgage payments are your priority bills, before credit cards or any other loans, as they protect your home.

You may wonder how you can budget effectively if you no longer have a regular source of income. What you’ll need to do is identify any money you have coming in, whether that’s in the form of benefits, or you taking money from savings or redundancy payments each month (while you’re looking for a new job) to pay for your vital expenses such as mortgage / rent, electricity bills and groceries. Always check if you’re eligible for benefits, rather than just living out of your savings or redundancy pay.

Avoid taking out loans

Try to avoid taking out new loans or credit cards when you’ve lost your job. If you’re used to taking out credit this can be a hard habit to break, especially when you feel financially constricted. However, getting yourself in debt just as you’ve lost a main source of income is never a good idea. Try and budget for your essential payments (rent or mortgage, for example) using whatever income you have coming in, whether this is a severance package or unemployment benefits. If you’re struggling to make rent, mortgage or energy payments, or if you have loans from before your unemployment, reach out to your lenders and service providers and see what options are available for your current situation. Options may include:

payment extension
an extension of a loan term so you have smaller payments
a temporary hold on your repayments

Make sure you contact your lenders as soon as you can, as you will get a much more positive response than if you go into arrears. If you are already in arrears: don’t panic, you still have options for dealing with your debt, and reaching out to your lenders will show you’ve taken some action.

You should also be careful about the terms of any payment extensions or payment holds. Depending on the circumstances of your loan, interest may continue during your payment break, and you might end up having to pay more than you initially would.

Get health insurance sorted

If you lose your job, you tend to lose your health insurance and benefits too. One of the first things you need to do after losing your job is access alternative insurance, as this will help you avoid debt if you have a medical emergency. As we mentioned above, If your employment is terminated, you and your family may still have the right to continue using your group health benefits on your group health plan, for limited periods of time.

You can also continue insurance through COBRA (Consolidated Omnibus Budget Reconciliation Act). COBRA is offered to you after you’re terminated from a job, to continue the coverage you had with your employer. However, it is pretty expensive, although cheaper than paying for the same coverage entirely by yourself.

If you can’t afford COBRA, you can also apply for the new federally subsidised health care under the Affordable Care Act. If you’re unemployed, you’ll generally be eligible for either Medicaid or this new subsidised coverage for the time that you’re unemployed.

Look for a new job

Losing a job can be a really stressful experience. We may lose confidence in our ability and struggle to even think about finding work again. even if the redundancy wasn’t our fault. However, the sooner we get down to looking for a new job, the closer we get to securing a consistent income again, and staying debt free.

Already in debt? Here are some options

If you’re already struggling with serious debt, the first thing to know is: you’re not the only one and there are things you can do about it. Let’s look at a few options

Debt Management Plans

If you’re falling behind on your loan payments every month, you might find a debt management plan from a non-profit credit counselling agency a helpful way to get out of debt. Unlike debt relief companies, which often hope to make a profit from your difficulties, credit counselling nonprofits are designed to support people struggling with debt.

A debt management plan will help you get reduced interest rates and fee waivers on your debts (usually credit card debts). Rather than paying your creditors directly, you’ll make a single payment each month to your credit counselling agency, who will distribute it among your creditors. This is helpful as it will give you a break from the stress of dealing directly with your creditors, and put multiple payments into one, manageable payment, allowing you to budget more easily. Make sure you pick a credit counselling agency accredited by the National Foundation for Credit Counseling or the Financial Counseling Association of America. You’ll usually have to pay an enrolment fee and a monthly fee (typically around 20 to 30 dollars), but your debt repayments each month are still likely to be lower. Even so, make sure you check out any fees that are involved, and whether this is the right course of action for you.

Bankruptcy

Bankruptcy (also called liquidation) will erase most credit card debt, personal loans (unless they are secured against an asset like your house) and medical debts. However, it will seriously affect your credit score and you may not be eligible. Always seek advice from a free debt counsellor or charity before making a decision like this.

Now that we’ve covered a wide range of strategies to avoid debt if you’ve lost your job in India, the UK and the US, we hope you’ve found it a useful read. Losing your job is really difficult, but can be a path out of unemployment that doesn’t involve getting shackled in debt, if you manage your finances as carefully as possible and seek help where you need it.