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Experts Respond: How Should People Handle Debt after a Loss of Income?

In the past seven weeks, over 33.5 million people have filed for unemployment, and even more have faced pay cuts or reduced hours at work. A sudden loss of income can be overwhelming. While many creditors and lenders have allowed customers to defer payments in April and on into May, it’s unclear how long deferral programs will last.

With that in mind, we asked 21 experts for their advice on the best way to deal with debt during a period of reduced income. Hopefully, these tips from small business owners, financial experts, legal counsel, and CPAs can help you overcome challenges you may be facing. If you still have questions, please call Consolidated Credit’s free COVID-19 hotline at 1-800-745-2513 to speak with a certified credit counselor.

NOTE: Always consult with an advisor first! Before taking any action, which would affect assets such as your mortgage or retirement accounts, you should consult directly with a qualified expert. As a homeowner, you should talk to a HUD-certified housing counselor if you are considering refinancing or tapping home equity. Talk to a financial advisor before making hardship withdrawals or taking out loans on a retirement account. These types of consultations are free, so take advantage of them before you take action.

Alexa Serrano - Finder
Alexa Serrano


If you’ve lost your job, the first thing you’ll want to consider is filing for unemployment if you qualify for it. You’ll also want to talk to your creditors. If you’ve lost your job as a result of the COVID-19 outbreak, you may qualify for forbearance on debt or even late or waived payments.

Next, create a budget. Your budget should include your typical spending amount, your total debt, and the amount you’ll receive in unemployment. Identify areas in your spending that you can cut. It helps to bucket your spending into two categories — “needs” and “wants.” Consider cutting the items that fall under your “wants” section. This way you’ll free up unneeded costs during this time.

If your spending costs are still too high, consider tapping into your emergency fund. That’s what it’s there for. But you’ll want to have a concrete plan. Add your spending costs to your budget to see how long your savings can support you.

Alexa Serrano
Banking and Investments Editor at Finder


From a credit card perspective, there are a couple things you’ll want to do if you’ve lost your income. First, contact your credit card lenders. Most credit card companies are willing to work out a plan with you if you’re experiencing financial hardship. This help can range from interest deferments, to fee waivers, to a lower monthly payment plan. But to get this kind of help, you need to contact your bank.

The COVID-19 outbreak has also increased the level of aid coming out of banks. With so many cardholders facing financial uncertainty, many banks have opened COVID-19 resource pages that can help you find the help you need. You’ll want to check out these pages, even if you haven’t yet lost your job but think you might have a few tough months on the way.

The second thing you’ll want to do is look at your existing debts. If you’re not going to be able to meet the full monthly payments and it looks like interest is going to build, consider a 0% APR credit card. You can consolidate and move your eligible debts over to a balance transfer card and take advantage of a long 0% interest period while you pay down your new balance. This can save you a great deal in interest and frees up that money for the essentials while you get back on your feet.

Just remember that credit cards are tools: you won’t want to open a new balance transfer card without a plan in place for repayment.

Steven Dashiell
Credit card staff writer at Finder

Holly Hanna - The Work at Home Woman
Holly Hanna

The Work at Home Woman

Be proactive! Whatever your circumstances may be, it’s more important than ever to stay on top of your incoming bills and outgoing expenditures. First, take a look at all of your expenses and cancel any non-essential services. If you have essential bills and debt payments that you’re not going to be able to pay, call the institution to discuss your options. Some companies have grants available, while others are offering discounts or extended payment plans.

By being upfront about your financial situation, you can help to avoid penalties, late fees, and ruining your credit.

Holly Hanna


Look for alternative ways to make money. Are you good at writing? Look for freelance writing gigs on social media, job sites, etc. Maybe you dabble in graphic design. Sometimes you’ll only make $50, but that might be enough to cover those streaming services that keep you sane. Especially in the current situation, it’s a great time to start reassessing what skills you have and how you can market them. Explore every avenue and you might be surprised by what you find.

I also recommend avoiding putting anything on your credit cards. Keep them for emergency use only. If you have credit card debt, work on slowly decreasing it with whatever extra money you manage to bring in.

Maggie Lovitt

Maggie Lovitt - YourMoneyGeek
Maggie Lovitt
Matt Miczulski - FinanceBuzz
Matt Miczulski


An unexpected loss of income can be overwhelmingly stressful. If you were in the process of digging yourself out of debt, it can be even more frustrating — you may even feel as if your hands are tied completely. However, it’s important to know that you still have some options.

The first thing you should do is call your creditors to inform them of your situation and ask for help. They may have options to help you, whether it’s changing your due date or letting you defer a few payments. If you’re able to, continue to make your minimum payments on your debts. If that’s not possible, you may need to prioritize your payments. This means making the difficult decision of which loans to continue paying on and which to stop. Conventional wisdom says to make payments toward essentials like your mortgage and car first, and stop making payments toward personal loans and credit cards if you have to. Damaging your credit isn’t ideal, but you don’t want to get evicted or have your car repossessed.

If you have existing credit card debt, another option is to open a credit card that has a 0% APR balance transfer offer. These cards allow you to transfer your credit card debt and avoid paying interest for a certain amount of time, usually 12 to 21 months. After that time, your regular interest rate will kick in. This can be a really helpful option to save money on interest in the meantime.

You may also want to consider credit cards that offer 0% APR on purchases. These are usually for 12 months, and allow you to avoid paying interest on new charges if you must carry a balance from month to month. Just like a balance transfer card, keep in mind that the APR will rise after the promotional period. It’s important to also consider the pitfalls of opening new credit cards, like the potential to rack up even more debt.

Losing a source of income is tough but remember, there are options.

Matt Miczulski

The Street

  1. Reach into your savings, but not too much. Make sure you have ample savings for investment down the line. You don’t want near-term spending ability if it means long-term financial pain.
  2. Make sure to receive every last penny of government stimulus you are entitled to.
  3. Apply for jobs as an essential worker – those are in high demand (grocery stores, etc.).
  4. Refinance your debt if you haven’t already done so. Capture low interest rates to make your debt less burdensome.
  5. Review your investment portfolio and find opportunities in financial markets for long-terms gains, making your savings reach-in less risky.

All of these things increase cash available/income and decrease debt. That’s a huge positive.

Jacob Sonenshine

Jacob Sonenshine - The Street
Jacob Sonenshine
Samantha Milner - RecipeThis
Samantha Milner


During the summer of 2008 as the recession hit, we found ourselves living in a cheap caravan with a monthly income of just $900 a month. This was our income to feed myself, my husband and our son who was 6 years old at the time.

This reduced our income by more than half.

We focused on keeping our outgoings at the absolute lowest they could be and never got into any debt.

We took our groceries down to $30 a week and focused on food that we could stretch over more than one meal. Such as filling out meals with beans and potatoes.

We did some side hustling and found little ways to earn a little more. My husband did airport runs for friends of my parents on a regular basis.

We shard Wi-Fi with others to keep the cost down on internet usage.

In summary, the best way to stop yourself going into debt when you have a big drop in income is to save money on your outgoings. Cut as much from groceries as you can, get rid of cable, bake instead of buying baked goods, and see if you can pay other things in installments if you need to.

Samantha Milner

Self-Directed Retirement Plans

A fact of life is, debt is alive and will probably be with you always. How you handle debt is important. There is good debt and bad debt.

Good debt, for example, will be the mortgage on your primary residence. This debt provides security for your family and is paid down over a long period of time. Hopefully, your primary residence is an appreciating asset, and in most cases the interest is tax deductible. Your net interest expense therefore is lower than what your mortgage statement indicates.

An example of bad debt is high-interest nondeductible credit card debt.

How to save: If possible, shift interest from nondeductible to deductible. Also, if possible, look into using a Home Equity Loan – much lower interest.

At Self Directed Retirement Plans, we specialize in self-directed 401(k)s and self-directed IRAs, for the past 16 years, so we will look through that lens.

There have been some recent major changes affecting retirement accounts.
In particular – access to retirement dollars. The Secure Act changed RMDs (required minimum distributions) from taking effect for an extra two years. The CARES Act took it another step further and suspended RMDs for this year.

But the part of the CARES Act that affects most people is access to their retirement dollars for the first time ever. Before CARES, a person accessing their retirement funds before 59 ½ was hit with a 10% penalty and income taxes. Now they can request a distribution at any age, no penalty and three years to pay the taxes vs. one year.

Also, before CARES, a person requesting a personal loan from their workplace plan or a self-directed plan was allowed to borrow 50% of the plan’s value up to a maximum of $50,000. After CARES, a person can now borrow 100% up to $100,000. It is a loan, not a taxable event, and you still have five years to pay it back. The interest you pay on this loan is paid to yourself and could be used to get rid of high interest debt.

One more idea is: loan yourself some money, pay off high interest debt and create an emergency fund. Having a three-month emergency fund will relieve a lot of stress.
Rick Pendykoski

Rick Pendykoski - Self-Directed Retirement Plans
Brian Meiggs - My Millennial Guide
Brian Meiggs

My Millennial Guide

While debt can be a result of circumstances beyond your control, it’s important that you use this time to reflect on your own habits and behaviors.

A bit of introspection will work wonders for your future finances. Where did you go wrong? How can you do better next time? Audit yourself and own up to your problems, as responsibility can mean that half of the battle is won already.

Don’t waste time pointing fingers and get to work. After all, any kind of debt can cause psychological issues just as much as financial ones, and you’re only going to make things worse if you’re not thinking about the right things.

Remove all thoughts of blame, self-doubt, and even guilt from your mind, and use hope and determination as your fuels to get you through. Your thoughts and feelings count for a lot in a situation like this!

Once you have your head in the game, you can focus on debt reduction plans like the debt snowball method, which is a debt-reduction strategy that I’ve used in the past.

It’s a great method to pay off debt if you have multiple debt accounts such as student loans, car loans, or credit card debt. To begin paying off debt the smart way, you would pay off the debt accounts starting with the smallest balances first, while paying the minimum payment on larger debts.  After you pay off the smallest balance, take the money you were using on that balance and roll it over the next debt balance. Repeat this method until you have paid off all your debt accounts.

The debt snowball method is one of the best things you can do in order to pay off your debt fast.

Brian Meiggs

Family Money Plan

When you lose income, the first thing to do is to contact your creditors. With all the programs out there right now, it’s possible that you may be able to temporarily defer your payments and save on the accumulating interest.

The last thing you want to do is put the extra burden on you to come up with a way to pay down your debt during these times. Call them up and tell them what has happened, and ask what can be done to minimize your payments and see if what’s possible. After you have done that, look over your budget and decide what can be cut out and what can be delayed in your budget.

Andrew Daniels

Andrew Daniels - Family Money Plan
Andrew Daniels
Lewis Keegan - SkillScouter
Lewis Keegan


Some of the things you can do manage your debts after a loss of income are the following:

  • Prioritize your debts before your luxuries.

After setting aside enough budget for your necessities such as food, utilities, medicine, and education (if someone from your family is currently studying), prioritize your debts before buying things you can live without like bags, perfume, watches, and the like.

  • Start a small business of your own or work as an online freelancer.

If you are good at writing, building a website, or doing graphic design, you can offer your skills in some freelance and legit paying sites online. The key here is to find a new source of income to sustain your lifestyle and to be able to settle your debts.

Lewis Keegan

Women who Money

Suffering a loss of income can be very stressful, but you don’t want to ignore your bills and payments at this time. You also want to avoid taking on additional high-interest debt as you wait for your income to grow. Using credit cards to pay for expenses may seem like a quick fix in these situations. They can also put you deeper into debt if balances grow and you can’t pay them off in a few months.

An important step to managing your debt after a loss of income is knowing your personal cash flow. You probably know how much money goes into your bank each month. If you don’t track your expenses, it’s hard to slow the flow of money out of your accounts.

You can try a free app like Mint or Every Dollar to track spending or use a simple spreadsheet or notebook. Comb through previous credit card statements to see where you’ve been spending, too. When you understand and take control of your personal cash flow, you’ll be able to make a budget and determine how to pay for necessities and manage debt payments.

If you qualify, apply for any unemployment, government, or financial assistance that is available.

Speak with your current creditors, including utility companies and landlords, to see if they are offering any assistance programs such as lowering a monthly bill temporarily or deferring a monthly payment, or to see if you can negotiate lower interest rates.

Use emergency savings or any other extra funds you have to pay your necessary expenses – food, shelter, health care – first, then pay the minimum on your debts wherever possible.

Remember, your current situation is temporary. Once you create your cash flow and debt payment strategy, you can focus on increasing your income and eventually pay down all your debt for good.

Amy Blacklock & Vicki Cook

Amy Blacklock & Vicki Cook - Women who Money
Amy Blacklock & Vicki Cook
David Reischer - LegalAdvice
David Reischer

Bankruptcy provides considerable relief for anybody overwhelmed with unsustainable levels of debt after a loss of income. A person does not need to fear phone calls and letters from debt collectors demanding payment after a bankruptcy is declared.

A bankruptcy filing is a very affordable option that costs between $1,500 and $2,500 to file, with the help of a lawyer. A person really should hire a qualified bankruptcy attorney to review the individual circumstances. There are some software programs that can assist an individual, however an experienced bankruptcy attorney will be better able to navigate the process. A person with a complicated financial situation will probably want to hire a bankruptcy attorney. Whereas, an individual with limited income
and/or assets need not hire an attorney when filing for bankruptcy. The process for filing bankruptcy becomes more challenging depending on the complexity of the individual financial situation.

Chapter 7 is commonly referred to as a liquidation bankruptcy. An individual that enters Chapter 7 Bankruptcy liquidates most of their assets with limited exceptions to pay off creditors.

Chapter 13 Bankruptcy is what sometimes referred to as a reorganization bankruptcy, in so far as it designed to allow individuals with regular income to keep most or all of their property so long as they pay off their debt obligations through a repayment plan.

A benefit of Chapter 7 is that it allows an individual to quickly discharge their debt and get a fresh start. A negative of Chapter 7 is that non-exempt property must be sold to satisfy any debt obligations to creditors

A benefit of Chapter 13 is that an individual is allowed to keep most or all of their property and catch up on payment obligations owed to their creditors. A negative of Chapter 13 is that an individual may not be able to meet their re-organization obligations.

David Reischer

Retire Early Lifestyle

Hopefully, before this situation came about, there was money placed into an emergency fund. Depending on the circumstances, there could be 3 to 6 months’ worth of living expenses, but better yet, 3 to 5 years’ worth.
In this way, one would have the time to gain other employment, move around one’s expenses to pare down, get a temporary short-term loan if necessary or even sell items (like a second car) that might not be needed.
The point is to gain some time to reassess your situation without the mental burden of living hand-to-mouth and getting further into debt.

Billy & Akaisha Kaderli

Billy & Akaisha Kaderli - Retire Early Lifestyle
Billy & Akaisha Kaderli
Brian Brandow - Debt Discipline
Brian Brandow

Debt Discipline

Income loss can be an emotional event. The fear and stress associated with not being able to pay your bills can be overwhelming. The worst thing you can do is run and hide from it. It may be tough to tackle it head on, but it’s something you should try and do as soon as possible.

If you don’t already have a budget, grab some paper, and write out any income you still have coming in, and all monthly expenses.

The goal when facing income loss is to survive it, until regular income returns. Depending on your situation, and how long your income will be decreased will determine how drastic you may have to cut back on spending, including making debt repayments.

Your main goal should be to keep a roof over your head and food on the table. Prioritize your list of expenses by your needs. Discretionary spending is something that can be cut immediately, things like eating out, subscription services, other entertainment, etc.

If you are unable to pay other bills like credit cards, student loans, etc. communication is the key. Call the companies and explain your situation. They would much rather understand why they are not being paid and may be willing to work with you. This is the better approach than ignoring them and the outstanding balances altogether. The recent global pandemic where many faced income losses has shown many companies are willing to be flexible.

Once you have the list of expenses prioritized and have communicated with the companies, and bills you cannot pay, your focus should be on bringing your income back to a reasonable level. Do you quality for unemployment? Are there any items you can sell on eBay? The job search should be a top priority. Leverage your network, friends, family, co-workers, and let them know you are in the market for a new job. Most employers value a personal recommendation when trying to fill an open role. Good luck!

Brian Brandow


At the current rate of unemployment, the 2020 Coronavirus pandemic is set to overtake the historical unemployment rates of the Great Depression. The kicker? In 2020, more people not only have bills, they also have more debt on average than ever before. Whether it is student loans, credit card debt, auto debt – you name it – managing your debt can be hard enough. But with a loss of income, it can be even harder.

However, there are ways to weather the virus and come out on the other side with your debt under control. First things first, create a budget and look to cut out all unnecessary expenses that do not support the basics such as food, shelter, health and transportation. This might mean putting subscriptions and wants like shopping on hold.

Next, see what debt payments you can still make. Based on this, you will want to list out all your creditors and monthly payments and assess whether it’s possible or not to make the monthly payments. It’s OK if you can’t make ends meet because of a loss of income. The smart money move to make in this case, is to call and send a written email to each creditor.

Calling and working out a plan is a proactive step in managing your debt when you lose your income like one in five have during this pandemic. Additionally, sending an email or letter documents your attempt to work with your creditor, thus preventing possible penalties. Showing initiative is vital!

To recap, address the four walls of the house – food, shelter, health, transportation – then see what you can pay. What you can’t pay, call your creditor and ask for a plan that can pause interest charges and credit hits!

Josh Hastings

Josh Hastings - MoneyLifeWax
Josh Hastings
David Leonhardt - The Happy Guy
David Leonhardt

The Happy Guy

When our business income went down a few years ago, we renegotiated our mortgage and consolidated as much of our debt in the new mortgage. We did that because the interest rate on our mortgage was lower than on our lines of credit.

Consolidating debt in a lowest-interest vehicle is a great way to reduce the monthly cost of interest payments to stay afloat. It sure beats living on a diet of nothing but white bread.

David Leonhardt


It is imperative that the first thing you do is contact the companies who are managing your debt. Some may have clauses in place that will help protect you while looking for new work. This may not always be the case, but i always recommend checking first.

Whatever you are left paying, move these to the minimum payment that the company will accept – this can be frustrating, and may mean you are reaching your goal at a slower pace, especially if charges are being incurred. However, the charges are less doing it this way than if you start missing payments.

Ethan Taub

Ethan Taub - Loanry
Ethan Taub
Stacy Caprio - Fiscal Nerd
Stacy Caprio

Fiscal Nerd

One way to manage your debt after an income loss is to look at how you can cut costs so you can put more of what is coming in toward paying off your debt. You can do this by looking at your monthly recurring costs such as streaming services, cable, phone bill, and any software you may pay for monthly. Then, see what you can cut outright and be fine with.

For others, call the companies and negotiate either delayed payment or cut costs for the next 6 months, which many will be happy to work with you on. For the rest, see if you can split with a close family member or friend and share logins on. Reducing your fixed monthly expenses in creative ways is one of the best ways to cut your expenses if you’re running on a tight budget or out of work.

Stacy Caprio

How to FIRE

A loss of income can be extremely stressful, especially if you have the weight of debt on your shoulders. Whether it’s your mortgage, student loans, credit card debt, or personal loans that you’re worried about, there are quite a few options available to lessen your burden.

The first thing I would recommend you do is to make a budget or fine-tune the one you already have. It’s important that you understand what cuts you can make in your spending so you can ensure that you meet your debt obligations.

If making budget cuts doesn’t match the income loss you’ve had, there are other steps you can take. Try talking to your lenders to see if forbearance or income-based repayment is an option. You can also look into applying for unemployment benefits if you’ve lost your job completely.

Even go as far as contacting your auto insurance provider to lower your rates based on having less of a commute each day. There are plenty of resources out there, and people who are willing to help. You’ll get through this!

Sam Hawrylack

Sam Hawrylack - How to FIRE
Sam Hawrylack
John Egan
John Egan

John Egan

When you’re dealing with a loss of income, one of the strategies you can use to manage your debt is to temporarily make minimum payments on your debt to conserve cash. This shouldn’t be a long-term strategy, though. It’s simply a short-term approach. If you make minimum payments for too long, your interest charges will pile up, and it’ll take you longer to pay off your debt. Once you’re able to, start paying more than the minimum each month so that you can decrease your interest charges and cut the amount of time it’ll take to pay off your debt.

If you’ve lost income, don’t be afraid to ask for help. Contact credit card issuers and other lenders to see if they can temporarily halt your payments or temporarily reduce your interest rate. It can’t hurt to ask. If you find yourself in a real financial bind, consider contacting a nonprofit credit counseling service to come up with a budget and work out a plan for managing your debt.

John Egan

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