Debt and Unemployment
Most families have financial goals such as buying a home, taking care of your family, and educating children. The majority of the population depends on income from a job to fulfill their family's needs. However, in today's highly competitive global economy, corporate downsizing, layoffs, pay cuts, and business failures are resulting in increased unemployment.
American households have accumulated nearly $10,000 in credit card debt - 64% more than ten years ago [Source:http://newsbusters.org]. According to experts, one of the reasons for this increase can be attributed to the rising unemployment rates.The Bureau of Labor Statistics states that rate of unemployment rose from 5 % in April to 5.7% in July 2008. Unemployment forces consumers to rely on their credit cards to make ends meet. This, in turn, leads to an increase in consumer debts. The latest Federal Reserve Report states that credit card debt has hit an all time high of $14 billion [Source:www.pri.org/business].
Many households when faced with a sudden loss of income find themselves facing a mounting debt burden. While trying to manage mortgages, unpaid student and car loans, and rising interest rates, a credit card often comes to the rescue. But this is probably the worst solution to debt problems. The right thing to do is to first get a complete picture of the family's finances. List all the family's financial resources: spouses' income, unemployment compensation and severance pay if applicable. Next, list your monthly bills and expenses. Secured debts such as mortgages and car loans are non-negotiable and should not be defaulted on. However, with reference to unsecured debts like and credit cards bills, it is imperative to notify the concerned creditors regarding the new unemployment situation immediately. By informing the creditors in advance, negative actions can often be avoided or delayed. Finally, try to stop any further credit card purchases, to avoid increasing this debt.
Apart from increasing stress on the personal and professional front, unemployment makes it unaffordable to pay your debts. For many, a Debt Management Plan is often the best way out. This involves the payment of a single monthly installment that is then disbursed to all your creditors. You may receive benefits through a DMP plan such as reduced interest rates or waived late fees if applicable.
Layoffs make life hard enough and our trained credit counselors can guide you to the best options available.