Dear Debt Adviser,
I have a significant amount of debt with high monthly minimum charges (approximately $350 a month). My husband is unemployed and has been working odd jobs here and there. Our income barely covers the cost of our monthly expenses. We have a little bit of money in savings for emergencies, but not enough to cover something serious. I just received a check for $1,000 from a friend who owed me money from years ago. Should I put that money in savings in case we need money for an emergency? Or would it be better to pay down one of the credit cards?
-- Perplexed

Dear Perplexed,
I get questions just like yours often. It's hard to know what to do with extra cash when you have been struggling for so long. Besides applying it to savings or debt repayment, many think some of the windfall should go toward some rest and relaxation or a nice surprise for a family member who has been forced to do without. You, however, are clearly focused on getting out of debt as quickly as possible. Here's my take on your situation.

Based on your minimum payment amounts, my estimate is that your debts are between $20,000 and $25,000. The fact that you have some money in savings tells me that you are serious about managing your finances. Trying to pay down your debt at this point won't work for you.

The key to successfully getting out of your debt situation is for your husband to get steady work. Anything less will not solve your problem. Although rumor has it that the economy is improving, it may be months or years before your husband is once again among the gainfully employed.

I recommend you place the $1,000 windfall into savings. The reason being, once you have gone through your cash reserves, you have no idea when you can replace them. So, add the $1,000 to your emergency savings and hope for the best -- that things will improve quickly -- but plan for the worst.

Beyond hoping for a break on the job front, there are a couple of things your husband can do that may increase his chances of getting a job. Many people don't know that it is routine for many employers to pull a copy of an applicant's credit report before making a job offer.

There are a number of good reasons to do this, some based on studies and others on personal opinion. Studies show that an employee with financial problems will likely be distracted and less productive at work. Also, bad credit may indicate poor judgment, irresponsible behavior or a lack of character in a new hire. The upshot is that many employers will not bother to ask why a credit report indicates a problem, they'll just move on to the next qualified candidate with a good credit record.

If he hasn't already, I suggest that your husband get a free copy of his credit report from the website AnnualCreditReport.com and look it over. He should dispute anything he doesn't recognize as well as any out-of-date or inaccurate entries. Then, when his report is as accurate as possible, he needs to develop a short and to-the-point explanation of why he has so much debt, what he is doing about it and why he's still a worthy hire.

Lastly, I recommend you contact your creditors and let them know your situation. Tell them you are having trouble meeting your monthly minimum payments due to unemployment. Ask what programs they may have available to help. Most creditors have some type of short-term (six months to a year or so) hardship program to help lower monthly payment amounts. Some even forgive some interest, fees or principal.

If you don't receive the help you need by contacting your creditors directly, you might consider contacting a nonprofit credit counseling agency for assistance. You can find a reputable agency by visiting the Web site of either the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling. They may be able to get creditor concessions you can't, relieving some of your financial pressure.