As the new year unfolds, many union members might be facing the challenge of managing holiday debt. More than half of respondents in a 2021 survey said they spent too much during the holidays1.
This is a common scenario, as more than one-third of Americans took on holiday debt in 2022, with an average amount of $1,5492. Now is the best time to get your members information on how they can help lower their debt. Below we’ll cover helpful tips to manage and pay off this debt, utilize financial counseling, and negotiate with creditors.
Assess and Plan
A good way to handle holiday debt is to keep track of the total amount owed. For example:
Manage Budgets and Expenses
Creating a budget is essential. Remind members that reviewing their monthly expenses may be beneficial and identify areas where they can cut spending.
Small changes, such as cooking at home or canceling unused subscriptions, can free up funds for debt repayment.
Online financial tools, mostly free, that can help include:
Financial counselors can provide personalized advice on budgeting, debt management, and saving strategies. They can also help members understand their credit reports and scores.
Customized Financial Plans
A financial counselor can develop a tailored plan addressing your financial situation. This may include debt consolidation and setting financial goals.
Educational Resources
Counselors provide resources to help members understand financial concepts and products, empowering them to make informed decisions.
Negotiating with Creditors
Financial counselors can help negotiate with creditors, leading to arrangements like payment plans or reduced interest rates. They can explain the financial situation and inquire about hardship programs or possible adjustments to their payment terms.
In some cases, creditors may agree to a debt settlement for less than the total amount owed. While this can provide relief, it's important to understand its potential impact on credit scores.
Bankruptcy should be considered a last resort due to its long-term impact on credit. There are different types of bankruptcy, and legal advice is crucial to understand the implications.
Consequences of Bankruptcy
Bankruptcy can offer relief from overwhelming debt but also has significant consequences, including a lasting impact on credit scores.
The Legal Process
The bankruptcy process is complex, varying between Chapter 7 (liquidation) and Chapter 13 (reorganization) bankruptcy. Professional legal advice is essential.
We have a more in-depth article about bankruptcy in this blog article.
By assessing, planning, budgeting, seeking financial counseling, and/or negotiating with creditors, union members can take control of their finances this New Year. While bankruptcy is an option, it should be considered carefully.
Encouraging members to take these smart financial steps can lead to a more secure financial future.
Member Resources’ Legal and Personal Protection Plan can further help your members. It provides free or low-cost access to financial counseling and legal assistance. Visit our website to learn more.
*The information provided in this article is for informational purposes only and is not intended as professional financial advice.
The content is presented as a general guide and may not apply to your financial situation. We strongly recommend consulting with a qualified financial counselor or advisor before making any financial decisions.
1 Debts of Holidays Past: How to Pay Off Last Year and Plan Ahead Now from Emily Cahill
2 Here are some strategies that can help you dig out of holiday debt by Sharon Epperson
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