While many are worried about falling behind a bit on bills and the fear of a debt collector calling is a constant worry, now and in the coming months it is estimated that 4 Million American’s are going to lose their unemployment insurance benefits.

Some say the unemployment benefits extension that Congress past previously that extended benefits for up to 99 weeks was a blessing in a down economy. More conservative members have labeled those funds as wasteful.

I have heard the same argument that was voiced in the video above, people cheat unemployment for free money and then just sit back and relax. And while I have heard similar stories, by far the majority of stories I have heard and you will find on this site are about people struggling to make ends meet on unemployment.

On Unemployment? Think Bankruptcy

In my opinion a gross error made when in debt and on unemployment is to not seek immediate protection and discharge of debts under bankruptcy. Unemployment checks end, they stop, as we are witnessing now. When unemployment insurance benefits are used to pay down debt they don’t make the situation better, they make it worse.

So I’m assigning $35,000 of debt to my example person, Bob. Bob had a good job for a long time but through no fault of his own his job was cut 99 weeks ago. Bob’s been looking hard for a job but it’s been tough, real tough. He’s considered a lot of possibilities but nothing has really panned out for him.

Bob was always a person that paid his bills and after he was laid off he felt it was his duty to continue to make the payments. He didn’t want to hurt his credit or collectors to call.

So Bob took part of his unemployment checks, which were a fraction of what he had been making, and sent it off to his creditors. Bob’s old checks were much larger than the $430 a week he gets in his unemployment check in New York. So just meeting the basics and keeping some roof over his head eats up most of his check. But Bob has made ends meet by using money from his 401(k) as well to help make ends meet and get by. And he also sold stuff on Craigslist to help generate some cash as well.

The 401(k) ran out a couple of months ago, there isn’t enough money to send to creditors this month, and the unemployment benefits are ending in a few weeks as well.

Bob represents the amalgamation of many of the stories I have heard from typical people in trouble. His situation may be uncommon in your world, but it is not in mine. Bob, a proud man, made some bad decisions when it came to his debt. By not facing the reality of his situation and making better decisions about his debt the only thing that was ultimately achieved was that Bob drained his retirement account, used all of his unemployment benefits, and his debt is not extinguished. While Bob owes less, he has not eliminated the problem or his debt. In fact, there were times during the past 99 months that Bob says he was forced to use his credit cards to get by, spending on basic food. Rather than going down much, if at all, Bob’s debt has climbed a bit despite the fist full of blood dollars he was able to send.

So regardless of what the underlying emotional drivers were the reality is Bob is now faced with:

• more debt from his forced use of the credit cards;
• the loss of his 401(k) retirement fund;
• the ending of his unemployment benefits;
• the dreaded collection calls;
• the loss of his valuable things he sold;
• damage to his credit when he starts sending less than is due; and
• no plan on what to do next.

Let Me Suggest an Alternative Approach

If Bob had faced his financial demons early in his unemployment he could have filed bankruptcy and used the next 99 weeks to regroup looking forward instead of trying to prevent something that was unpreventable.

Filing bankruptcy would have allowed Bob to:

• protect his 401(k) from creditors and preserved some to actually use for his future retirement;
• blocked collection calls;
• prevented lawsuits for debt;
• use his unemployment benefits to try to get by on; and
• most importantly would have allowed Bob to look forward, not back.

Click here to find a local bankruptcy attorney.

If there is no expectation that debt can be extinguished through income then there is no logical reason to continue that path. But people do, all the time. And the primary reason people do is because they are afraid of the unknown, so they make silly decisions. When people are afraid of the creditor, collector, being sued, hurting their credit, and one and on, they make reactionary choices about about their debt.

Rather than effectively deal with their debt they instead push the problem, silently and detrimentally into the future through minimum monthly payments. For many the continued threat of the debt leads to desperation, depression, fear, stress, embarrassment, anger, etc. Would you agree?

In that mindset it is much harder than it needs to be to fight for a better future. Hell, you can’t even see the future because you are so busy looking backwards to try and pacify the past.

Until you terminate the past liabilities from that time when you had a different income you will not be able to utilize your income and time to make a better future.

Let me put this real world for you. If you or our friend Bob had terminated his unmanageable debt at the time he lost his job the fear of what may happen would have been eliminated, so the focus on the future would have been concentrated into doing better moving forward. I have always found that better things happen moving forward through inspiration rather than desperation.

Through whatever law of nature, it just seems that finding a job, finding hope, finding gratitude and good spirits, is just much easier when the focus of your day can be on what is to come, rather than on what has already passed us by.

What Next?

What we know for certain is that unemployment benefits are expiring for many and the question then becomes, “What next?” Unfortunately the answer is not good news. Rather than having something to live on, the result will be next to nothing.

I suppose if there is a silver lining at all it is that some benefit programs will still exist, just not unemployment benefits.

One site I think offers an easy way to find benefits is Benefits.gov. This government site has a form that asks you questions to identify what benefits may be available. These benefits can include food, heat, shelter, etc. And while the benefits process is not always fun, it is truly better than nothing.

And while I’m talking about benefits, let me address one common urban myth that floats around. There is no free money or grants available to help people get by. As the Benefits.gov site so eloquently says, “The government will not give you money just because you ask for it,” and “Grants are used to carry out a government authorized purpose, and are not provided as personal benefits or assistance.”

Do This

Once you close the door on the past unmanageable debt the next step is to move forward. My advice is to take any job, any part-time job, and any opportunity to earn money. In reality the money becomes the secondary benefit. The primary benefit is that activity breads opportunity and being out among others, with a purpose, creates a better chance of finding your new future and building on the opportunities presented by any job. I’ve been there. I’ve worked some of the worst temporary jobs you can imagine but in the end, they were all a stepping stone in the right direction.

Consider visting Snagajob.com to find local hourly employment. To find job listings provided by your state visit this page.

And if you are out of time and unemployment benefits, there is still some potential free help available to assist you to file bankruptcy. Visit the Bankruptcy Pro Bono Resource Locator to find a local office that might be able to assist you.