Paying the bills after a layoff

• $0Cost to call and ask for the hardship program
• PausedA set number of monthly payments put on hold
• LowerA smaller payment at a reduced interest rate
• WaivedLate fees, if you ask
• WrittenConfirmation to get before the new terms start
• 7 yrsHow long a late payment can stay on your credit report

• Card issuers call these hardship, forbearance, or loss mitigation programs. The CFPB says they often let you postpone a set number of payments or pay less at a lower rate until the balance is paid.
• Terms depend on your income, what you can pay, and what you owe, so 2 people at the same bank can get different offers.
• Questions to ask on the call: does interest keep adding up, when does relief end, what gets reported to the credit bureaus, and can you still use the card.
• Mortgage forbearance pauses or lowers payments but doesn't erase them. For most loans, the servicer can't demand the skipped payments in one lump sum when it ends.
• Ways out of mortgage forbearance include a repayment plan, a payment deferral (missed payments move to the end of the loan), or a loan modification.
• Federal student loans made before July 1, 2027 qualify for unemployment deferment of up to 3 years. The new RAP plan has a $10 monthly minimum; IBR can still go to $0.
• Late payments, charge-offs, and collections can stay on your credit report for up to 7 years, which is why the call usually comes before the due date.

Sources:CFPB: Start with your card companyCFPB: Mortgage forbearanceCFPB: Leaving forbearanceCFPB: Credit report timelinesDept. of Education: Repayment changes

It's the company you owe agreeing to take less for a while. It costs nothing and fits best when income is coming back within a few months. The catch: the debt doesn't shrink, and interest can keep adding up while you wait.

If the catch is a dealbreaker: Juggling several credit cards at once? A nonprofit credit counselor can handle all of them in 1 plan.

• $0First session with an NFCC-certified counselor
• 30-60mLength of that first session
• $75Top of the typical setup fee for a debt management plan
• $25-50Typical monthly fee, set by agency and state law
• 10%Rate some card interest can drop to, or lower
• 3-5 yrsTypical time to finish a debt management plan
• 1Monthly payment, split among your creditors by the agency

• A counselor goes through your budget and debts. If a debt management plan fits, you send the agency 1 payment a month and it pays your creditors.
• The plan doesn't cut what you owe. It lowers the monthly payment by getting creditors to reduce interest, waive fees, or stretch the timeline.
• Some or all of the credit cards in the plan get closed, which can lower your score at first.
• Fees can be waived based on income or military service. The FTC says a reputable agency gives a written quote for any fees and doesn't charge before doing anything.
• Plans cover unsecured debt like credit cards and medical bills, not a mortgage or car loan. For housing, a HUD-approved housing counselor is the free version.

Sources:NFCC: Debt repayment methodsNFCC: What members chargeNFCC: Debt management plansFTC: How to get out of debtCFPB: Counseling vs. settlement

A nonprofit counselor looks at the whole picture and can fold your cards into 1 lower payment. It fits when card debt is the main problem and a few months of relief won't clear it. The catch: plans run 3-5 years, and the cards are gone for the duration.

If the catch is a dealbreaker: Only need a few months of breathing room? Calling each lender for its hardship program is free and shorter.

• 15-25%Typical fee, based on the total debt you enroll
• $0What they can charge before a debt is settled, by FTC rule
• 100+Points your credit score can drop
• 7 yrsHow long the missed payments stay on your credit report
• $600Forgiven debt at which a lender files Form 1099-C
• 7 daysBusiness days to get your saved money back if you quit

• These for-profit companies usually tell you to stop paying creditors and save into an account, then try to negotiate lump-sum payoffs.
• While you stop paying, late fees and penalty interest pile up, and creditors can sue. Many creditors won't negotiate with these companies at all.
• Under the FTC's Telemarketing Sales Rule, a company can't collect a fee until it settles at least 1 debt, you agree to the deal, and you make at least 1 payment on it.
• The money in the dedicated account is yours. You can leave at any time without penalty and get the balance back within 7 business days.
• The IRS generally counts forgiven debt as income. Lenders file Form 1099-C for $600 or more, but if you were insolvent, Form 982 can exclude some or all of it.
• Account fees can apply too, and the company may not settle every debt - leaving the rest bigger than when you started.

Sources:FTC: Telemarketing Sales RuleCFPB: Debt relief programsNFCC: Debt relief pros and consIRS: Canceled debt

A company stops your payments, saves up, and bargains your balances down. It's aimed at people with debt they truly can't pay back. The catch: fees, lawsuits, a wrecked score, and a possible tax bill can leave you deeper in the hole than when you started.

If the catch is a dealbreaker: Expect income back within a year? Hardship programs and a nonprofit counselor's plan skip the missed payments entirely.

• 20%Withheld for tax before the check reaches you
• 10%Extra tax if you left the job before the year you turned 55
• $13,600Left from $20,000 at a 22% federal bracket, before state tax
• $1,000Emergency withdrawal once a year with no 10% tax, if the plan allows
• 3 yrsWindow to pay that $1,000 back
• Tax dayDeadline, with extensions, to move an unpaid plan loan into an IRA

• A cash-out is taxed as income. The plan withholds 20% up front, and that may not cover the full bill.
• The 10% additional tax is waived if you left the job in or after the year you turned 55 (50 for some public safety workers), for that employer's plan only.
• Since 2024, plans can allow 1 emergency personal expense withdrawal a year of up to $1,000 without the 10% tax. Repaying it within 3 years restores the option sooner.
• 401(k) loans are capped at $50,000 or half your vested balance, whichever is less, and are repaid within 5 years. Plans generally lend only to current employees.
• If you had a plan loan when you were laid off, the unpaid balance becomes a loan offset. It's taxed unless you put that amount into an IRA by your tax filing deadline, including extensions.
• Hardship withdrawals can cover eviction or foreclosure costs, but they're taxed, can carry the 10% tax, and can't be paid back into the plan.
• No credit check either way, and nothing shows up on your credit report.

Sources:IRS: Early withdrawal exceptionsIRS Notice 2024-55IRS: Plan loan FAQsIRS: Hardship withdrawals

It's your own money, so there's no lender and no credit check. It fits when the free options are used up and bills can't wait. The catch: taxes can eat nearly a third of it, and a loan from a plan you've left usually isn't on the table.

If the catch is a dealbreaker: Price it next to the free options first: a hardship program or a counselor's first session costs $0.