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Dealing with Debt While In Between Jobs



One of the hardest parts about switching careers is how to bridge the financial gap. While in a best-case scenario, you are able to maintain the income from your former career while preparing for your new career and can keep your bills under control. But not everyone is so lucky. Many who are looking for a new career are doing so because they can afford their expenses in their existing career, or they have lost their prior job completely. To add to the pile, the process of acquiring the skills and credentials for a new career can have its own costs.

So what do you do if the bills are piling up in your transition, and what is the right time to take action?

What Are the Risks of Having Debt That is Out of Control?

There are a number of risks that come with having debt that is out of control. First, debts that have fallen behind will often have a negative impact on a credit report. Second, if a debt has fallen far enough behind, it is possible that the creditor will file a lawsuit to collect on the balance. Negative marks on your credit or in court records in some instances can impact your eligibility for some certifications and for employment, so these issues should be avoided where possible.

In more extreme situations, the debt could result in your wages or bank account being garnished or other consequences as set out by state and federal law.

Options for Controlling Debt

There is a spectrum of different options for controlling debt, which vary based on the severity of the debt, the capacity to pay, and whether the debts have been maintained or have already fallen behind, says Mike Ziegler, managing attorney with the Debt Fighters. Here is a quick rundown:

  1. For less severe situations, you might start by simply calling your creditors to see if they will allow you to defer your payments or reduce your interest rates. You could also look at a debt consolidation loan to effectively refinance your debt.

  2. For debt challenges with intermediate severity, meaning one or two debts may have fallen behind (or is about to fall behind), but there is still at least some income that could go toward the debt, debt settlement is often an appropriate option. Your creditors may be willing to reduce the amount owed or enter into alternative payment plans to get the debt resolved.

  3. For more complicated debt situations where there are several debts out of control or if there is no income available to put toward the debt, chapter 7 or chapter 13 bankruptcy may be the best option. Bankruptcy may be particularly appropriate if creditors have filed collection lawsuits. The decision to file bankruptcy should be carefully considered with a professional as bankruptcy can have trade-offs; however, bankruptcy can often clear out debt dramatically faster and less expensive than any other option.

When is the Right Time to Consider Options for Clearing Out Debt?

So when is the right time to deal with your debt, particularly if you are in between jobs or careers?

“I have consulted with thousands of people on their journey to get their debt under control,”  says Attorney Mike Ziegler. “And one pattern that has become apparent is that people tend to want to ignore dealing with the debts when their income is at a low point. And I think that is an understandable tendency—no one wants to deal with something that they don’t have the resources to address. 

“But that low mark is often the most advantageous time to deal with your debt. Your creditors may be more willing to make an aggressive deal if they see you don’t have income. Likewise, for those who may benefit from a bankruptcy option, a consumer is more likely to qualify for chapter 7 bankruptcy (which is faster and usually less expensive) when they are in between jobs based on the bankruptcy ‘means test’, as compared to after they are back in the workforce.”

Final Thoughts

If you find yourself moving “past due” notices from the mailbox straight to the garbage can, you aren’t alone. It isn’t easy—mentality or logistically—to deal with debts when you are between jobs or careers. But get your plan in place to deal with your debt sooner rather than later.  

Mike Ziegler, Esq.

Mike Ziegler, Esq. is the managing attorney for the Debt Fighters, a Florida law firm committed to helping consumers deal with debt overwhelm.  www.attorneydebtfighter.com.

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