If you are currently buckling down in your spending and amping up your frugality due to a recent layoff, one of the first things that you should consider is that you probably owe money to a few people.
These people are not monsters, but they might get that way if you suddenly stop making payments to them. One of the best preemptive strikes you can make is to let them know your status as soon as possible.
Because you want to retain a record of your interactions with your creditors, you should always initiate your contact via a good old fashioned letter. Sure, it’s gonna cost you 44 cents, but at least you know that you got through to someone.
This will ensure that your creditors know your status, will work with you, and will come to know your name because your account is in arrears. Should your job hunting be less fruitful than you anticipated, your creditors will be much more happy to work with you.
Below is the letter that I sent to my creditors. Feel free to copy and past this into your word processor, and change any relevant information.
If you work for a lending company or have any inside information, I would love to collect stories on the effectiveness of this approach.
Dear Sirs:
Last week, I became another statistic.
As of this month, approximately 10% of the population of Ohio is unemployed. This number has now been raised by yet another person. Me.
As you have seen by my past record, I have every intention to keep my account up to date. I am currently seeking employment, but there are no guarantees as to who that will happen in today’s tough economy.
While my first priority is protecting my credit rating, I also want to keep our relationship friendly at all times.
I will keep in contact with you often, to let you know how things are going, but in the interim I would like to have someone from your office contact via telephone to discuss possible options, including temporarily reducing my interest rate.
You can reach me any time at:
(insert phone number)
#1 by Ela on July 8th, 2009
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This is excellent advise for someone who is about to default on their mortgage; most mortgage companies will work with people. If you have been laid off, one must prioritize where the little money that’s coming in will go. The reality is that you have to have food, shelter, utilities and probably a car. You have to immediately drop everything else; the gym membership, cable, restaurants, etc. The last payment you should make is to credit card companies. Something has to give. The experience I had (an others I know) is that the second you are late on your credit card payment your interest rate jumps up. Not just for the card you’re late on either. They pile on late fees and higher interest and make demands that are unreasonable. My experience was they were unwilling to work with me at all. They called the house daily, even though someone at the company had been told that payment would not come until a specific date. I found that unless you can be very specific about when you can pay they will immediately threaten suit. You are not required to subject yourself to constant telephone calls. You can advise them that you prefer to communicate via the US mail. If you have a lot of credit card debt that can not be paid back you may have to consider bankruptcy, because the credit card companies are not hestitant to sue or sell your debt to a junk debt buyer whose sole business is to win profits awarded by the court.