Michael
“Dear Steve,
I’m almost 30 years old, have a law degree from one of the top law schools in the country, and was laid off in December after working only a few months.
In any other economy, I’d be easily employable. Sadly, the world is not looking for junior lawyers with little experience right now. I’ll probably get a job in the next six months, but at that point I may be looking at as much as a year of zero income.
That, of course, follows THREE years of law school with zero income and FOUR years of college with zero income, which allowed me to rack up quite a bit of student loan and credit card debt.
The student loan debt is about $100,000. I’m not AS concerned about it, because it is very low interest, and the payments are pretty manageable. The credit card debt, about $25,000, however, is not.
My interest rates range from 10 to 20%, and my monthly unemployment payment of about $1,200 plus another $1,000 in financial assistance from my parents (which I am embarrassed to take at this point, but I must) JUST covers my rent and the minimum payments on all my bills.
I have yet to miss a payment, but I am completely out of cash, and now putting groceries, prescriptions, healthcare, etc. on credit cards — worsening the debt burden. My healthcare costs alone are about $500 a month between insurance and treating a chronic (but not life-threatening in any way) condition.
I feel guilty every time that I open my wallet, I wake up every morning thinking about this mounting debt. I want to get out. A job — which hopefully will come soon — will help, but even then it will be tough.
I can float like this for another three months or so, but then I will start falling behind. Even if I get a job tomorrow, I will still have to put virtually ALL of my income towards debt repayment. Where should I start?
Michael”
Dear Michael,
My guess is that the chronic condition you suffer from is student loanitis. Right?
Seriously, as counter-intuitive as this sounds I suggest that you stop using the credit cards and stop making payments to them. Sure, it will lead to collections and screw your credit a bit but stay with me here. In the hurry to find intervention and solutions people almost always overlook the option of doing nothing.
Right now your choices are to smack your debt with bankruptcy or buy yourself a bit more time to land that elusive job. If you stop making payments you can’t afford, that will give you about six months time to land a job and start making money. At that point you can pick up the pieces and move on.
Whatever you do, keep the student loans current. After July 1, 2009 there are going to be some awesome interest rates available for you to consolidate those loans down to a stupidly low rate.
Now this situation is going to eat at your ego. Here you are, a well trained lawyer from a top law school, and you can’t pay your bills and will probably be in collections. Let me share with you the ultimate wisdom about these types of situations, “Dude, shit happens.” This isn’t about you, it’s more about a series of situations and occurrences that you have no control over that aligned to make your life hell.
In the meantime, go register with a temp company and do something, anything to make money in the interim. Many of us have had to do that in our life. Read You May be Down and Unemployed But You Are Still a Hero to Me. I’ve had to do it myself. It sucks, but it is what it is.
So what happens if you follow this approach and you can’t land a job in six months? Bankruptcy. But there is no need to fire a cannon to kill what is an annoying gnat right now.
If you do land a job and are able to start paying your bills again, the collections mess can be dealt with and with some time and repayment your credit can be healthy and strong again.
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
Do you have a question you'd like to ask me for free? Go ahead and click here.
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Lawyers have to be careful about not paying bills. They can jeopardize their law license and eligibility for other related positions.Â
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You shouldn’t have to pay on a student loan while laid off on unemployment. Contact your lender and apply for a loan deferment under the “unemployed” category. If that does not apply there is a “hardship” category as well.
Also, you don’t mention applying for unemployment insurance benefits through your state. Hopefully you have pursued this for income as well.
Other ways to cut costs: move to a cheaper apartment or move in with family for now. Get your prescription medications through pharmacies that offer $4.00 prescriptions.
Good luck!
Michael:
I completely feel your pain, as I’m in a very similar position. I didn’t go to a top-tier law school, but I was laid off from a good-paying job last month and find myself with the same mountain of student loan debt and a hefty credit card debt to repay. It sucks.
I haven’t figured out my own solution yet, but keep in mind that, despite the public image, lawyers are a pretty close-knit group and will look out for each other. Check with your bar associations – everything from the ABA, to your state bar associations, to local bar associations. They should all have resources to help – job postings, career counseling, even psychological counseling. (A big part of the situation is your mindset, and sometimes talking to a counselor and being able to unload all the s**t that you don’t feel comfortable telling anyone else helps a lot.) Chances are you’ve already paid for this stuff through your bar dues, and there are a lot of different resources to take advantage of. Check them out.
And for money, it may sound scary, but as long as you’re in good standing and aren’t required to maintain malpractice insurance, you can always offer your legal services for a fee. That’s what we do, so get the word out there that you’re a licensed attorney and can help people with their legal needs. Again, the bar associations can provide a lot of the resources you need, including free access to legal research sites and ways of advertising. It’s a way to potentially bring in something while you’re looking for that other job, and who knows, you may like it enough to open your own firm.
In the meantime, set up a good plan, stick to it and don’t allow yourself to wallow in the situation. Get out and exercise when you can, spend time with your friends and family (who knows, could network into a paying gig or even helping someone out with a will) and remember that all of this is just about $ – nothing more. It’s a ridiculous concept, made up by people when they got too lazy to get their own food, and doesn’t mean a damn thing at the end of the day or the end of your life. It’s no reflection of the person you are, so don’t let this get to you.
Try and keep a positive outlook, and if things get really bad – we’ll partner up and start our own firm!
Good luck.
Unfortunately, mass unemployment in the United States continues to be on the rise as people struggle to survive this extremely bad economy. Our posting can update you on the latest bad economy and mass unemployment news.