How to Manage Payments if You’re Unemployed

1. Register for Unemployment Benefits

If you're eligible for unemployment benefits, register with your state's unemployment agency as soon as possible. To qualify, you must have been recently employed and be unemployed for a reason that's not your fault (such as in a layoff or business closure). Job loss due to quitting or a firing typically isn't covered. You're also subject to requirements for time worked and wages, though these vary by state. Additional criteria may be required in your state.

To get started, find your state's unemployment insurance office and review requirements. If you believe you are eligible, file a claim. Depending on the state, you may be able to file by phone, in person or online. If your claim is approved, you'll receive temporary payments starting two to three weeks later. To continue receiving benefits, you'll usually need to continue filing claims weekly or biweekly and report your efforts to find work. Know that benefit payments are temporary and not intended to fully replace your income.

2. Allocate Your Severance Pay, if Applicable

While it's not required by law, some employers provide severance pay when they lay off workers to help them get by until they find a new job. The compensation amount could be based on several factors, including the person's length of employment, salary and their role in the company. A common formula is one to two weeks of pay per year worked there, and it may also include extended benefits. It could be paid in a lump sum or in installments over time.

If you received severance pay when you were let go, it's important to use it wisely since you don't know when you'll have income again. Take the time to allocate where it will go, such as toward essential bills only. It might help to put it in a savings account and only move over what you need to get by each week or month so you're not tempted to dip into it more than needed.

3. Rework Your Budget

While there can be resources available and exceptions made during tough times, it's best to plan without the assumption they'll be accessible. If you don't already operate on a budget, now is the perfect time to create one to track your monthly expenses and make sure you can live within your means. If you received severance pay, factor that into your budget. When reviewing recent statements, you might be able to find some ways to tighten your spending.

If you do have a budget, figure out if there's any spending you can temporarily trim or cut altogether. You may need to pause discretionary spending, such as buying clothes or getting restaurant delivery, until you have consistent income again. Think about any recurring expenses you can temporarily cancel, such as subscriptions, streaming services or your gym membership. As a last resort, you could dip into savings if that's your only option to pay bills—just make sure to pay yourself back later.

4. Continue Making Minimum Payments

While you may feel stretched thin during unemployment, aim to keep paying every bill possible—in full and by the due date. Especially try to continue paying at least the minimum payment on your credit cards. If you pay your bills late, or miss payments altogether, it can wreak havoc on your credit score, and it could also cost you in late fees.

If you can't afford to pay every bill on time, you may need to prioritize your payments by importance. Maybe this means ensuring your mortgage or rent is paid on time every month so you don't risk losing your housing, and prioritizing your car loan so your means of transportation isn't at risk of repossession. If it's something nonessential, it may be better to temporarily cancel it rather than suffer the consequence of late payments.

5. Reach Out to Your Lenders and Service Providers

If you do suspect you'll be late to pay a bill or unable to pay it at all, proactively reach out to the lender or utility service to let them know about your job loss and resulting financial pinch. It's ideal to communicate in advance with your creditors, including lenders, utility providers and insurers. Even if you think you will be able to pay your bills on time, but will be cutting it close, it might still be worth inquiring about flexibility to give your budget more wiggle room. Your options may be limited if you wait until you're late on a payment to communicate with them.

When you contact your providers, ask if there are any hardship options available for customers like you who are struggling to pay your bills due to unemployment. You may be able to negotiate for assistance such as delayed bill due dates, lower payments or loan forbearance, giving you temporary relief from paying the loan if you're falling behind. Make sure you understand the specifics of the agreement, such as if you'll still be charged interest or your term will be extended, and get it in writing.

6. Consider Debt Consolidation

If you're struggling to manage your debts during unemployment, one possible solution is to consolidate your debt. This process entails consolidating multiple debts (usually credit card debts) into one lower-interest form of debt, such as doing a balance transfer to a 0% intro APR credit card or a debt consolidation loan with a lower interest rate.

This brings some or all of your debts into one monthly payment that may be more manageable, especially if the interest rate is far lower than what you were paying.

7. Look for a Credit Counselor

If you're feeling overwhelmed, consider enlisting help from a credit counselor through the National Foundation for Credit Counseling. Credit counselors with this nonprofit organization can negotiate with your creditors and help you make a debt management plan (DMP). The process can lower your interest rate and monthly payment, allowing you to get your finances under control. Your credit counselor might also help you make an emergency budget and a financial action plan.

If your credit counselor creates a DMP, the included accounts may be noted on your credit report as being repaid through credit counseling. This won't negatively affect your credit score, though other actions that are part of a DMP, such as closing accounts, may have an effect. Still, this type of plan can help you rebuild a pattern of on-time payments. For-profit debt settlement firms may offer to negotiate settlements with your creditors as well; however, they can be risky and expensive, so research the costs and consequences before going that route.

8. Look for Ways to Make Extra Money

If you've tried these tactics and are still struggling to make ends meet, try finding other ways to obtain more income during this time. The idea is to earn enough to help you pay the bills while you search for jobs. You might look for odd jobs for neighbors or friends, such as babysitting or mowing lawns. You could also apply for a part-time job at a local store, or dabble in the gig economy.

Another option is to look for temporary online work to pay the bills, such as becoming a virtual assistant or doing freelance administrative work including transcription, research or data entry. These platforms can help you begin your search:

• Upwork: This platform is popular with businesses and entrepreneurs looking to hire a variety of professionals for freelance gigs.
• FlexJobs: FlexJobs is a subscription service that can connect you with remote jobs (full-time and part-time).
• Fiverr: Fiverr specializes in "micro-gigs" that can be done quickly, such as writing a few posts for a client's social media page.
• Indeed: While many job seekers may be familiar with Indeed for its traditional job postings, the website can also be used to find freelance opportunities.

What Happens if You Stop Paying Bills?

If you can't afford to pay your bills at all, the consequences can be punishing. Here are some of the potential pitfalls:

• Late payments can result in late fees and drag down your credit score.
• Some companies may charge interest on late payments, and some loans and credit cards charge a penalty APR for very behind payments.
• After enough time has passed, your services and utilities may be shut off.
• Long-unpaid accounts may go into collections, which means damage to your credit score and the headache of the debt collection process.

The Bottom Line

Dealing with unemployment and the resulting financial hardship can be incredibly stressful and scary, but hopefully these tactics and resources make it easier to navigate and survive this tough time.

Despite the precarious financial situation from job loss, it's critical to do everything in your power to pay all bills on time, every time. If you find yourself making late payments or working with a credit counselor while you're unemployed, it might be useful to keep an eye on your credit to see what's helping—and what's hurting—your efforts. You can monitor your credit for free through Experian.