How To Get Unemployment Debt Relief
11 MIN READ
Published April 06, 2023 | Updated September 25, 2023
Unemployment or reduction of hours can quickly dwindle your savings and put you in a tight spot. If you have racked up crippling debt while being unemployed, there are many resources available, including unemployment debt relief.
Job loss is one of the most stressful life situations.
Not knowing when you will find a new job, coupled with mounting debt, is stressful for anyone. The last thing you want is to worry about whether you will be able to make repayments.
The unemployment rate in the U.S. was 3.6%, and with 5.9 million unemployed people in February 2023, there are many people in a challenging situation that is out of their control.
If you are being chased by lenders or receiving creditor calls, do not lose hope. There is always a solution available.
There are many resources available for those who have unemployed debt. Below, we list some of the steps you can take to regain control of your life.
Take action at the earliest so you can quickly resolve your financial situation.
You’re Not Alone in Your Unemployment Challenges
Other than unemployment, there are many job-related issues, such as furlough, reduction in hours, and underemployment, that can contribute to financial issues and debt.
The problem can be compounded when you do not have savings and are carrying a lot of debt. The last thing you want to worry about while applying for unemployment is how to get out of debt.
The reality is that even when your paychecks stop coming, your bills will continue to come. You can struggle to keep up with your monthly cost of living.
Regardless of the problems you are facing, you are not alone.
It may be tempting to swipe your credit cards or take out a new loan to deal with your expenses. Credit card debt will only add to your problems.
If you are receiving unemployment insurance benefits, it is important to know that overpayment of unemployment benefits is not uncommon.
From April 2020 to March 2021, states identified $12.9 billion in overpaid unemployment insurance. This also applies to the Pandemic Unemployment Assistance claimants that received benefits through the CARES Act.
Benefit overpayments are usually due to unintentional errors, but some of the other reasons include fraud, inaccurate application, inaccurate wage history, and applying when you are unqualified.
If you have received an overpayment notice from the unemployment office stating, it can be nerve-wracking.
What To Do If You’ve Been Told to Pay Back Unemployment Benefits
If you have been told that you need to pay back all or some of the overpaid unemployment benefits or Pandemic Unemployment Assistance, here’s what you can do.
Repay the Overpayment Balance
You can contact the state department of labor to pay back the overpaid benefits in full if you have the resources. You can also request to set up a repayment plan for the overpayment amount you owe.
If you think that you have received the repayment notice in error, you can file an appeal and request a hearing. No collection actions will be taken during the appeal process. Once the overpayment determination has been made, you’ll know whether you need to repay the overpayment balance.
Even if the overpayment is legitimate, you can request forgiveness or waiver of PUA. Check the requirements of your state and request an overpayment waiver at the earliest. Waiver requests can also be sent online.
Make a Budget and Prioritize Expenses
One of the best things to do when dealing with unemployment debt is to make a budget with free budgeting tools such as budgeting templates in Google Sheets, banking apps, and even with just a pen and paper.
Clients who can budget appropriately and commit to monthly payments to pay down debt are more likely to achieve a debt-free life.
Take a look at all your bank accounts and divide your expenses into fixed expenses and discretionary expenses.
All fixed or mandatory expenses, such as food, utility, and housing, can’t be avoided. You can cut back spending on discretionary expenses such as events, shopping, and dining out.
Ultimately, you will need to think about what you really need and things that you can temporarily do without.
Here are a few ways you can manage different expenses while you are dealing with unemployment.
Rent or mortgage is a mandatory expense, but there are several options available to ease your burden.
If you have a mortgage, you can contact your mortgage lender to explain your situation. Some lenders have temporary financial hardship programs that you may be eligible for.
It is a temporary solution and one that is not very effective, but it can help.
If you rent, you can negotiate with your landlord or property management company to temporarily reduce your rent in exchange for maintenance work.
You can also consider moving in with your parents or a family member, or to a cheaper place while you are out of work.
Another solution to reduce your housing costs is to take in roommates.
Try to reduce your utility bills by taking measures to reduce your consumption.
Take shorter showers, turn down your thermostat, wear warmer clothes indoors in winter, and any other measures that will allow you to save energy.
Many utility companies offer tips to reduce energy consumption.
Food is one area where you will be able to find the most savings. Cut down on dining out and cook more at home. Compare prices at different stores to reduce your grocery bills.
If you are in a tough situation, you can also check to see if you are eligible for food stamps through the Supplemental Nutrition Assistance Program. Check to see your eligibility for the SNAP benefits.
If you have an auto loan, you can check with your lender to see if they have a hardship program. While you will need a car for job interviews, it is possible to save money on car payments.
If your car payments are quite high, it might be best to switch to a cheaper used car. Look around and compare your options to find a used car that will be more affordable than what you currently have.
Another area where you can save money is your phone bill. While you’ll need to have a cellphone to look for a job, see if you can scale back to a cheaper payment plan.
You can temporarily forego features like international calling or unlimited data to save money each month.
If you are in a contract, you can check with your provider to see if they have a temporary hardship program.
If you had health insurance through your former employer at an affordable rate, you might be able to continue the group coverage through COBRA. If you choose this option, it will usually be without employer subsidy.
If this option is no longer affordable, you can also look for options on HealthCare.gov.
Cable and Subscriptions
If you still have cable, consider switching to streaming videos. If you can’t do that, you can reduce your monthly payments by dropping all the premium channels.
If you have multiple subscriptions, it may be time to review all of them and see which subscriptions you can temporarily drop until you find a new job.
Apply for Government Assistance
Contact the unemployment insurance program in your state at the earliest for UI benefits, PEUC, or extended benefits.
Each state has its own guidelines and eligibility criteria for filing for benefit payments. Contact information is available on state websites.
There are also many other federal programs that you may be eligible for:
- The Temporary Assistance for Needy Families program offers eligible families financial assistance along with other benefits such as job training and child care. Check your state's TANF program eligibility criteria.
- SNAP or food stamps can provide you assistance with necessities such as groceries.
- Supplemental Security Income provides cash to people with disabilities and low-income seniors.
- CHIP, or Children's Health Insurance Program offers low-cost or free medical care to uninsured children if the family income is more than Medicaid’s limit.
- You may also be eligible for low-cost or free health benefits through Medicaid if you meet the program’s financial and non-financial eligibility requirements.
Utilize government assistance programs to save money on health care and food. This will allow you to allocate more money toward debt repayments.
Get an Expert Opinion on Paying Off Debt While Unemployed
When you have unemployment debt, it is important to be very vigilant.
Taking out a cash advance loan or a payday loan may seem like an easy way out. It is easy to rack up a lot of debt quickly because of the exorbitant interest rates on payday loans.
There are other, better debt relief programs available, like debt settlement, debt consolidation, and debt management.
Loans and credit cards may tide you over temporarily, but soon you’ll realize that you can’t afford to make the debt repayments each month.
Another option to stay away from is a home equity loan. HELOCs will allow you to borrow funds against your home’s equity.
It is important to remember that home equity loans are secured loans. This means that you can risk foreclosure and losing your home if you fail to make payments. It will also be challenging to qualify for these loans when you are unemployed.
It is crucial to talk to a personal finance expert to understand your options for debt relief when you are struggling financially.
An unemployment debt relief expert can give you the best advice on how to get out of debt when you are unemployed.
Seek credit counseling with a financial expert to understand the benefits and risks associated with different types of debt relief solutions.
While there are many temporary measures available, you may be unlikely to repay the funds you borrow when you are receiving a fixed weekly benefit amount.
A debt relief company will create a personalized debt repayment plan that suits your financial circumstances. In some cases, you may even be able to negotiate with lenders to waive penalties and fees, reduce interest rates, and settle your account.
Consolidate Your Debts
If you have multiple debts, a debt consolidation loan can be very effective, but this option will only be available if you are employed. If you find yourself unemployed and in need of relief, it could be worth pursuing a new job first in order to qualify for debt consolidation loans that will help you condense multiple debts into a single loan for easy repayment. It simplifies your debt and allows you to reduce your interest rate.
Debt consolidation involves applying for a new lower-interest loan or a 0% balance transfer credit card. Once approved, you can use the funds to pay off your higher-interest debts.
This can help you spread out your payments over a longer term so you will have lower monthly payments. Having a single payment each month also makes budgeting easier.
Unemployment debt can be a huge burden and a source of stress in your life.
The sooner you take steps to repay this debt, the easier it will be to get back to your life. The options and resources listed above are a good starting point.
If you are looking for expert advice on unemployment debt relief, TurboDebt can help. Our advising, planning, and consultation services will help you find the right debt relief option to pay off your debts faster.
Connect with our knowledgeable debt relief professionals for a free consultation today. Here’s what our satisfied clients are saying about our debt relief services.