Losing a Job: First Five Calls to Make to Get Financial Help

The shock and stress felt when you lose your job can be overbearing. The typical emotions from a job loss like fear, anger, panic, and depression often times prohibit you from making some important decisions about your finances. You are not alone in coping with the emotions of a job loss, but there is financial help available. (Click here to read more about coping with the emotions of a job loss.)

Important decisions you make about finances after a job loss can affect your financial benefits in the long run. For example, did you know:

If you let your group health insurance coverage lapse for more than 60 days, a new insurance provider can exempt coverage of pre-existing conditions. This is one reason to consider COBRA or health coverage under a spouse employer sponsored group health plan.

Receiving child support, retirement pay, and pay from temporary jobs may affect your unemployment compensation.

The IRS has special federal tax payment options for people who lose a job or cannot afford to pay the whole tax payment in April.

If you cannot make your Chapter 13 bankruptcy payment because of a job loss, you may have several options available to you, including converting to a Chapter 7 bankruptcy.

There are federal human resource (HR) laws, IRS tax payment options, and Stimulus Package relief for managing your finances, health insurance, and bankruptcy payments if you lose your job. Here are some financial resources and tips to help you recover from a job loss or reduction in income.

Losing a Job: First Call Your Human Resources Manager or Your COBRA Advisor

The Obama Stimulus Package allows reduced COBRA premium payments for some qualified individuals.

When you lose a job, be careful not to have a lapse in your group medical insurance coverage for more than 60 days, or you may face exemptions for pre-existing conditions from a new health insurance provider. If you do not have a lapse for more than 60 days in your group health insurance coverage, a new group health insurance provider in most cases cannot exempt you from pre-existing conditions.

COBRA is considered a group health insurance plan. You may also want to check out your spouse employer sponsored health insurance plan to avoid a lapse in your group health insurance coverage. There are federal laws governing the time frame that your former employer has to notify you of COBRA options. For more information about COBRA, visit FAQs About COBRA from the U.S. Department of Labor web site.

The American Recovery and Reinvestment Act of 2009 expanded eligibility for COBRA and provides a premium reduction to certain qualified individuals who lost their job on or before September 1, 2008 through December 31, 2009. Individuals who are eligible for COBRA and elect COBRA may be eligible to pay a reduced premium amount that is only 35% of the premium costs for your COBRA coverage.

If you are already on COBRA, the law does not allow reimbursement of premiums for coverage periods beginning before February 17, 2009. Qualified individuals can, however, receive the premium subsidy going forward, for up to nine months.

Contact your COBRA plan administrator to apply for the reduction or if you have specific questions about your situation and how these new rules apply to you, you can speak with a Department of Labor Benefits Advisors by calling 1-866-444-3272. You should also check the Employee Benefits Security Administration's dedicated web page at www.dol.gov/COBRA.

Losing a Job: Second Call Your Unemployment Office; Apply Online in Most States

The Obama Stimulus Package extends the timeframe that you can claim extended Emergency Unemployment Compensation (EUC).

In many states, you can now file for unemployment benefits online and avoid the embarrassment of standing in the "government hand out line." In many cases if you file online and you are eligible, your first unemployment check will arrive direct deposit into your bank account within 7-10 days of filing. Each state has different unemployment eligibility requirements that are affected by:

Having temporary work assignments

Time frame for appealing a denial of unemployment compensation

Reasons for losing a job

How much unemployment compensation you will receive

How long you can receive unemployment compensation benefits

Choosing to receive retirement pay

Amount of child support payments you receive

The original federal Emergency Unemployment Compensation (EUC) benefit was created in June 2008 to extend the number of weeks a person could receive unemployment benefits beyond what the state provided. The Unemployment Compensation Extension Act of 2008 expanded EUC to 20 weeks nationwide and created a second tier of 13 more weeks of EUC for individuals in states with high unemployment rates.

In February 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 that extends the amount of time a person can file for and be paid EUC benefits. Click here to see which agency in your state administers the EUC benefit and what emergency unemployment benefits you are entitled to in your state.

Losing A Job: Third Call the Internal Revenue Service (IRS)

The Internal Revenue Service (IRS) understands the hardships of an economic downturn and has special allowances for people who cannot afford to pay their federal income tax debt in April. If you lost your job, you may be able to get a waiver on penalties for making late tax payments. It is important to understand the tax implications of getting help when you lose your job. For example, any money you receive for severance, accrued sick leave and vacation time, unemployment compensation and withdrawals from your 401K are taxable. Public assistance and food stamp benefits are not taxable.

You should contact the IRS at 1-800-829-1040 if you lost your job, had a reduction in income, or cannot pay your taxes. Read the IRS publication titled Tax Impact of Job Loss for more information. You can also find more information about federal income tax payment plans by visiting IRS Tax Payment Options.

Losing a Job: Fourth Call Your Bankruptcy Lawyer if You Have Filed or Considering

If you are making Chapter 13 bankruptcy payments and have lost your job, you may be able to file a motion for abatement of payments. You should contact your bankruptcy lawyer right away and learn about your options for postponing bankruptcy payments or for converting your Chapter 13 bankruptcy to a Chapter 7 bankruptcy that would wipe out your debt completely. If you have had a reduction in income for six months, you may also qualify for reduced Chapter 13 bankruptcy payments for the remainder of the life of your bankruptcy.

If you have not filed for bankruptcy protection and are in jeopardy of being evicted from your rental property or are in jeopardy of losing your home, filing for a Chapter 13 or a Chapter 7 bankruptcy may stop the eviction or foreclosure proceedings. Contact a bankruptcy lawyer in your town immediately and learn the facts that are best for your situation. Tip: if you choose to file for bankruptcy protection, it is best to use a local bankruptcy lawyer because you will likely be making several trips to the lawyer's office for consultation and to the court where your bankruptcy case will be heard. Click here for more general information about filing a Chapter 13 Bankruptcy.

Losing A Job: Fifth Call All Your Creditors

Write letters to your mortgage lender, credit card companies, car lender, utility companies, phone company, and banks where you have other secured or unsecured loans.

In an effort to help people through this recession and bad economy, many lenders have adopted special programs to help laid off workers through financial hardships. Call all your creditors to see what revised payment options are available and be sure to follow up with a letter to the appropriate loss mitigation departments.

Sources:

Emergency Unemployment Compensation

http://workforcesecurity.doleta.gov/unemploy/supp_act.asp

IRS Tax Impact of Job Loss

http://www.irs.gov/pub/irs-pdf/p4128.pdf

IRS Tax Payment Options

http://www.irs.gov/taxtopics/tc202.html

FAQs About COBRA

http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.HTML

Coping with a Job Loss

http://jobs.utah.gov/jobseeker/dislocatedworker/dislocated_worker.htm

Chapter 13 Bankruptcyhttp://www.tennlegalaid.com/Library/Documents/1179428351.72/Chapter13web507.pdf