Job Loss and Debt: Could You Pay Your Debt Without a Job?

If you’re up to your neck in debt, facing a job loss would probably have serious consequences, whether you’re currently single with no dependents or if you have a family to support.

You’d surely have all your important bills to pay still like your mortgage or rent, food and other living costs, as well as the minimum repayments to your creditors.

You may know that the hubby and I have been in debt seriously twice. The first time was back in 2003 and the second time was when our daughter was born (right through to the present day). Today I want to share with you a bit more about how our debt turned bad the first time around and the knock on affect this had on our lives.

A job loss meant losing half our income

My hubby faced job loss three months after we moved into our first home. He worked (and still works) in a very niche industry and as such jobs like his were hard to come by. We had a lot of credit card and loan debt even back then (around £35K) which needed to be paid every month along with our new mortgage.

I can tell you that my hubby losing his job was the second scariest moment in my life regarding our debts (feel free to read the rock bottom section of my debt story for scary moment no.1).

Of course, we couldn’t pay all our bills and something had to give. We had to prioritise and keep a roof over our heads so that meant not being able to make the unsecured debt payments. The overdraft ended up completely maxed out at £5K and we started to default on our other minimum payments.

My hubby lost his job just before Christmas that year and we went to see our Bank Manager on Boxing Day to ask for some advice and hopefully to get an overdraft extension to see us through until my hubby sorted out a new job.

Our Bank Manager told us there was nothing they could do and advised us to go bankrupt because of the amount of debt that we had. (In hindsight this was really bad advice because we did have other options). We left the bank in total silence and the fear and terror that I felt at that moment was absolutely sickening.

We didn’t go bankrupt and we got through that awful time with the support of our friends and family who were really understanding about what was happening to us.

A race against time to get another job

As I said before, my hubby works in a niche industry and is highly trained in one specific field. There are literally only a handful of jobs like his in England. They tend to come about by the contacts you’re in touch with and usually only if you’ve been recommended.

After searching for jobs in his industry to no avail, my hubby set about applying for every job that he thought he could do. He tried a few stop gap jobs like delivering cars around England and then hitch-hiking back home again until he landed a job in a similar industry at half his old salary. We were so relieved when he’d found work.

It was a humbling experience

I remember having to take the Christmas presents back that we’d bought all our family and friends and having to tell them what happened. My hubby’s parents helped us clear the overdraft and we set up a savings account to pay them back.

My wonderful parents brought us bags of food from the supermarket for a couple of months so we could at least eat whilst my hubby went out every day looking for a job. I carried on pretending everything was fine at work. The whole experience was traumatic, humbling, embarrassing and something I keep locked away at the back of my mind most of the time.

If we had treated our debts with caution and tried to pay off more debt before we bought our first house then things would have been a lot different. We probably would have been more prepared in the event of a job loss and able to cope financially. At that time we needed all of both of our incomes to make ends meet.

What about your debts and your job?

There are some things you can do to help yourself if you can’t cope with your debts after a job loss. The Money Advice Service here in the UK has some pointers on how to deal with debt affairs if you end up losing your job. One thing not to do is borrow more money to try to survive your job crisis. That will only make your situation worse in the long run.

Even if you aren’t facing job loss now, if you have debts, you should think about what the impact would be on your life if you were to lose your job in the future. Job loss can happen just like that – through redundancy, illness or even through being fired.

Getting fired from your job doesn’t just happen to people who are too lazy to work properly or those that just can’t do the job right. I know a few highly skilled and professional (ex) work colleagues from my old job who were actually fired for seemingly insignificant things like surfing the internet at work or coming in late one too many times.

The safest thing to do is to not put yourself in a position where you need your job to pay your living costs and your debts too. Your debts could be the straw that breaks the camel’s back when life deals you a bad hand.

Do you rely on the income from your job more than you want to? 

*Image courtesy of Flickr and text overlay by Disease Called Debt.
*Part of Financially Savvy Saturdays on Femme Frugality and Debt Discipline*