Editorial Policy

Deal with Card Debt before Signing New Lease

Erica Sandberg

August 1, 2013

QDear Erica,

I heard you can help me. I'm being evicted from my apartment for rent not paid. I am currently unemployed after having a job for two years at a hotel and am living on unemployment insurance payments. I have two credit cards. One is empty and the other is new because I did a balance transfer offer from the old card to the new one. My new one has 0 percent interest. I owe them $1,544.23. I have no money in my bank account. To move into another apartment, I will need first and last month's rent and security. Do you think I should I put that on the card that I emptied? Also will the eviction be on my credit? — Sayra

AHi Sayra,

Sadly, so much is wrong with your financial situation. Happily, I can help you by providing a plan of action. I'm convinced that you can turn your life around. It's going to take a grand effort, though, so get ready to make some sacrifices.

Step 1: Find a free or cheap place to live. The eviction will probably show up on your consumer credit report only if you owe money to your old landlord (which you say you do). However, the new landlord can access your rental history via a tenants association. Chances are they will want to speak with your former landlord, and if so, you're sunk.Ask Erica

The truth is, you are in no position to rent a new apartment. With little to no income or cash and a credit report that shows you didn't pay your rent, a new landlord will have no confidence that you'll be a good tenant. Even if you were to charge the amount of money that you'd need to get your foot in the door (which is highly unlikely), I would not recommend doing so. In 30 days you'd have to start making rent payments, but with no job, how do you expect to do that?

However, you do need a place to live, so expand your horizons. Can you move in with a friend or family member for a short time? Maybe you can do all the housework or child care in lieu of paying rent. I just looked at Craigslist posts for various cities and came across several ads like this: “Room & bath in exchange for housekeeping plus small pay.” Ideal? Probably not, but it's better than being homeless.

Step 2: Secure a job and save like crazy. I know it's hard to find decent employment, but you have no option. You must work. Make it your job to find a job. When you have one, start socking away every spare penny.

Even if you don't earn much, you can save more than you think by radically scaling back your spending. For inspiration, talk to anyone who lived through the Great Depression. You'll hear all sorts of stories about lard sandwiches and victory gardens. If they made it through such hard times, so can you.

If you can manage to set aside $300 every month, in 12 months you'll have $3,600. Enough, hopefully, to move into a better home.

Step 3: While you're securing work and housing, keep your credit account in good standing. You don't owe a huge amount of money on your credit card, and that's great. Because you transferred the debt from one card to the other and have a promotional rate of absolutely nothing, don't mess it up by missing a payment. If you do, the 0 percent rate will jump up, potentially to something in the 20 percent-range.

Using your unemployment payments, send at least the minimum payment. For a balance of around $1,500, that should be less than $50. I rarely suggest paying just the minimum. In your case, though, the debt is small enough, and you have a 0 percent rate locked in for a while, so saving cash is a priority. When you're in a better position, you can delete whatever is left with a few lump-sum payments. In the meantime, don't charge any more to either account.

Step 4: Finally, you need to deal with your rental debt. By the time you're ready to move out on your own, you'll want to have paid down whatever you owe to your old landlord. Contact them and see if you can pay in installments. Plenty of people get sued for back rent, and you do NOT want this to happen to you. A judgment will appear on your credit report, the debt amount will increase because of court and attorney costs, and the judgment creditor (your old landlord) might even be able to take a portion of your wages when you do get a job.

You have a lot to do before you should even consider signing a new lease, but I'm confident you can do it, Sayra!

Got a question for Erica? Send her an email.