In Debt and Just Laid Off

superjeep · ‎10-14-2010

As goes the story of my life, right when everything's about to fall into place, something bad and unexpected happens. This week has been no exception. To give a brief background first, my most recent credit score was 730 and I have three lines of credit. A charge card with a zero balance and $3000 limit, an Amex card with a newly zero balance and a $2000 limit and a MasterCard (my oldest card) with an $11,500 balance which is also the balance - although I haven't used it, my nominal payments keep me in the same spot on this. In August, I just finished paying off four years and roughly $30k in medical expenses (this price tag is after negotiating with all my doctors, etc. and is the reason I ended up in credit card debt in the first place). Anyhow, with that out of the way, I snowballed that money over to my Amex card which I then paid off last month. Mind you, I had a small balance on this until last year, coincidentally - right after a surgery I had, when AMEX sent me a letter saying that since the economy was so rough on them, they had to increase my APR from 9% to....30%....which skyrocketed my payments and perpetuated my financial problems. Fortunately, I have since continuously called to get lower rates and they have obliged but only a little at a time. My Amex card is now at 16.24%. Anyway. Since that interest rate was killing me and I had so little left to pay, I was only making the minimum payments on my MC. This leads me to my current dilemma.

I got laid off this week. And because of all the medical bills and debt I've been in, I don't have any savings. I get three months severance but unless I have a job making at least as much as I was by the time I lose that, I will not be able to pay for rent, let alone anything else! So, I am trying not to panic and figure out what to do (other than get a job, obviously, since I doubt that will happen by tomorrow). I applied for two other credit cards to try to do a balance transfer and was denied both times and neither time was I given an explanation as to why. I can only imagine it's because the balance is high and only on one card. Either way, I am afraid to keep applying for fear of what that will do to my score, not to mention I don't know that I would get the 9% APR like I have now after an introductory rate.

Is it reasonable to ask if they would lower the interest rate from 9% on my MC? And/or is it possible to call and negotiate a lower balance? If I did that, would it hurt my score? Is it even advisable to mention you are no longer employed?? Or are they more apt to help if you are honest about your situation?

Although, maintaining my credit score isn't my priority right now, the last thing I want to happen is to come out of this with high debt AND bad credit....if I can help it. I have never been late on a payment and always pay at least the minimum balance. My current situation could change that though and that is my fear. At the moment, I'm not even considering bankruptcy or tapping into my (meager) retirement accounts as an option. I am keeping the faith that it won't come to that.

I'm just not sure where to go from here but I want to be proactive before I'm without ANY income. Any helpful advice is greatly appreciated.

Anonymous · ‎10-14-2010

Any advise? You have 3 months severance. Relax and focus on the job search and how versatile your skills are. Look at ways to cut spending. Make sure you can pay at least the minimum on the credit card so that it doesn't blow up to 30% interest as 9% does not sounds so horrible to me. When my $9k on my Bank of America credit card went sky high I negotiated closing the card and dropping the interest to 5.75%. I hope that helps!

Congrats on getting out from under all of that medical debt. That is quite an accomplishment. Good luck!

Anonymous · ‎10-14-2010

@superjeep wrote:
As goes the story of my life, right when everything's about to fall into place, something bad and unexpected happens. This week has been no exception. To give a brief background first, my most recent credit score was 730 and I have three lines of credit. A charge card with a zero balance and $3000 limit, an Amex card with a newly zero balance and a $2000 limit and a MasterCard (my oldest card) with an $11,500 balance which is also the balance - although I haven't used it, my nominal payments keep me in the same spot on this.   In August, I just finished paying off four years and roughly $30k in medical expenses (this price tag is after negotiating with all my doctors, etc. and is the reason I ended up in credit card debt in the first place). Anyhow, with that out of the way, I snowballed that money over to my Amex card which I then paid off last month.  Mind you, I had a small balance on this until last year, coincidentally - right after a surgery I had, when AMEX sent me a letter saying that since the economy was so rough on them, they had to increase my APR from 9% to....30%....which skyrocketed my payments and perpetuated my financial problems. Fortunately, I have since continuously called to get lower rates and they have obliged but only a little at a time. My Amex card is now at 16.24%. Anyway. Since that interest rate was killing me and I had so little left to pay, I was only making the minimum payments on my MC. This leads me to my current dilemma.

I got laid off this week. And because of all the medical bills and debt I've been in, I don't have any savings. I get three months severance but unless I have a job making at least as much as I was by the time I lose that, I will not be able to pay for rent, let alone anything else! So, I am trying not to panic and figure out what to do (other than get a job, obviously, since I doubt that will happen by tomorrow). I applied for two other credit cards to try to do a balance transfer and was denied both times and neither time was I given an explanation as to why. I can only imagine it's because the balance is high and only on one card. Either way, I am afraid to keep applying for fear of what that will do to my score, not to mention I don't know that I would get the 9% APR like I have now after an introductory rate.

Is it reasonable to ask if they would lower the interest rate from 9% on my MC?  And/or is it possible to call and negotiate a lower balance? If I did that, would it hurt my score? Is it even advisable to mention you are no longer employed?? Or are they more apt to help if you are honest about your situation?

Although, maintaining my credit score isn't my priority right now, the last thing I want to happen is to come out of this with high debt AND bad credit....if I can help it. I have never been late on a payment and always pay at least the minimum balance. My current situation could change that though and that is my fear.  At the moment, I'm not even considering bankruptcy or tapping into my (meager) retirement accounts as an option. I am keeping the faith that it won't come to that.

I'm just not sure where to go from here but I want to be proactive before I'm without ANY income. Any helpful advice is greatly appreciated.

I think a lot depends on the particular creditor. Which credit card company are you talking about? Maybe someone here has experience with them.

Actually, I am sorry to hear about your issue. Hopefully you'll find a decent job again soon. Meanwhile, though, the most important thing is to keep a roof over your head and food on the table. If you can do that and make your minimum payments, too, then so much the better.

Some credit card companies are pretty good about working with people in tough situations and I don't think it hurts to try. The worst they could do is lower your credit limits and the effect on that to your credit score would be temporary. A 3% reduction in APR could save you about $30 a month. Is $30 per month significant for you?

IOBA · ‎10-14-2010

Just a thought...be careful what you say to which creditors. Hearing that you are unemployed might cause them to drop the CLI or close the account out.

The one card at 9% is a pretty good rate. If you call them to negotiate the rate, it might come out that you are unemployed. A good thing and a bad thing when you are negotiating with a creditor. If they lower the rate, it might be for 6 months, it might be for a month.

Question - can you pay off that card in full right now with the severence?

What personal expenses can you eliminate right now, like cable? Reduce your cell phone package?

I am sad that you were laid off. I hope that you find another job soon.

superjeep · ‎10-14-2010

My MasterCard is through Edward Jones where I do have an investment account, although, since the economy tanked, so did it's value (it's worth roughly $3000). In fact, I've wondered if I should take that money and use it to pay down the card. I'm just leary to do that, especially since that would be the first line of income I would draw from if I don't find a job in 3 months.

Unfortunately, my regular pay over the next three months barely gets me by as is; it would never pay off the card. As it stands, my net income, (after taxes, retirment account contribution and flex spending account for my health expenses) is $2000/mth. Once I pay my rent, insurance and utilities, and make my minimum payment of roughly $200 on my card, I barely have money for gas and groceries each month. So, yes, $30 can make a big difference. As for trimming my budget, I have regular tv with an antenna, I never eat out, my cell phone is the only phone I have and is on the lowest plan possible....there's nothing else to cut

Fortunately, my family owns my residence and I know they won't evict me if I am late with rent but since I don't have any savings, even if I don't have a job in three months, I won't have money coming in to even buy food, let alone anything else. I know my family would help support me if worse comes to worse but my mom, who worked at the same place I did, was also laid off. I don't feel comfortable asking for help when my parents are going through this as well.

I do realize I have three months to find work, however, I'm trying to come up with a game plan in case I don't find a job in that time. After all, most people I know that have been laid off have been unemployed for at least a year before finding something full time/stable/permanent.....including my brother.

At the end of the day, this entire situation makes me frustrated with healthcare and credit companies and everything inbetween. I haven't been careless with my credit. I haven't gone on shopping sprees because I had credit available. I paid thousands in medical bills for an injury....even with insurance....rather than have it written off because like people on public aid, etc., etc. But I'm not the only one who could complain about these things which are really meant for another type of forum anyway Either way, I'm trying to remain positive. It's just a scary place to be on top of other stress too.

Thanks for all your input.

Anonymous · ‎10-14-2010

@superjeep wrote:
My MasterCard is through Edward Jones where I do have an investment account, although, since the economy tanked, so did it's value (it's worth roughly $3000). In fact, I've wondered if I should take that money and use it to pay down the card. I'm just leary to do that, especially since that would be the first line of income I would draw from if I don't find a job in 3 months.

Unfortunately, my regular pay over the next three months barely gets me by as is; it would never pay off the card. As it stands, my net income, (after taxes, retirment account contribution and flex spending account for my health expenses) is $2000/mth. Once I pay my rent, insurance and utilities, and make my minimum payment of roughly $200 on my card, I barely have money for gas and groceries each month. So, yes, $30 can make a big difference. As for trimming my budget, I have regular tv with an antenna, I never eat out, my cell phone is the only phone I have and is on the lowest plan possible....there's nothing else to cut

Fortunately, my family owns my residence and I know they won't evict me if I am late with rent but since I don't have any savings, even if I don't have a job in three months, I won't have money coming in to even buy food, let alone anything else. I know my family would help support me if worse comes to worse but my mom, who worked at the same place I did, was also laid off. I don't feel comfortable asking for help when my parents are going through this as well.

I do realize I have three months to find work, however, I'm trying to come up with a game plan in case I don't find a job in that time. After all, most people I know that have been laid off have been unemployed for at least a year before finding something full time/stable/permanent.....including my brother.

At the end of the day, this entire situation makes me frustrated with healthcare and credit companies and everything inbetween. I haven't been careless with my credit. I haven't gone on shopping sprees because I had credit available. I paid thousands in medical bills for an injury....even with insurance....rather than have it written off because like people on public aid, etc., etc. But I'm not the only one who could complain about these things which are really meant for another type of forum anyway Either way, I'm trying to remain positive. It's just a scary place to be on top of other stress too.

Thanks for all your input.

You might want to segregate that money now. If things do not go well for you and you miss a payment or two, they could likely use set-off and take that money to apply to your credit card debt. Hopefully it won't come to that, but just consider it as another piece in the puzzle.