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  • J. David Andress


Updated: May 28, 2020

If you have lost your job or have experienced a reduction in income due to the oil price collapse, the “stay at home” order caused by the COVID-19 virus, or for any other reason, you are not alone. According to multiple sources, the U.S. unemployment rate has recently surpassed 20%, which is the highest it has been in quite some time. Unfortunately, just because your income has stopped, it doesn’t mean your bills will. So, how do you deal with people who want money from you, when you have little, or none, to give?

Being proactive is the best way to deal with your creditors, especially when times are difficult.

A common reaction to financial difficulties is the “head in the sand approach,” but ignoring these issues is the worst possible course of action. A big thing to remember is that being proactive doesn’t require a huge amount of money. Here are some basic steps you can take to deal with your creditors when your income is negatively impacted:

1. Call your creditors. It’s a simple step, a common sense step, but it can be very effective in providing you with some financial relief. Most creditors have some type of program available for customers that are experiencing hardship. This is especially true during major disruptive events, such as the current pandemic, or natural disasters such as hurricanes. Most mortgage companies are offering three month deferments during this time and credit card companies are offering payment deferments, interest rate reductions, and even settlements on delinquent accounts. There is no harm in contacting your creditors. Just explain your situation and see what kind of assistance they can offer.

2. Categorize your debts, pay the essential stuff first. Again, this is another simple act that can help you to avoid compounding your financial issues. Simply sit down and divide your debts into groups: First – essential bills; Second – important bills; Third – everything else.

a. The first category, which takes the highest priority, are what I call essential bills. These items are going to be the same for most everyone: food, electricity, water, vital medications, and housing.

b. The second category comes next. These are things like communication (phone & internet) and transportation (vehicle loans, gas). These things are still very important but have available alternatives that are free or cheap, such as library computers, pay by minute phones, and public transportation.

c. The final category consists of everything else: credit cards, unsecured loans, medical bills, gym memberships, high priced data plans, entertainment subscriptions, eating out, movies, etc. These should be the last items that get paid in a zero-income type situation.

3. Consider bankruptcy. Bankruptcy is a scary concept for most people, but it shouldn’t be. Bankruptcy is designed to help individuals and business who have experienced job loss or income interruption. Depending on your circumstances, it is often possible to eliminate your unsecured debt while hanging on to assets such as your home and car. The total cost of a bankruptcy is often more affordable than what most people are paying monthly on their debt obligations. If you are considering bankruptcy as an option, the best thing to do is contact an experienced bankruptcy attorney to discuss what options are available to you.

What ever you do, don't give in to the temptation to do nothing. Doing nothing will accomplish exactly that.

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