Falling behind on bills can be one of the most stressful things in life. You may find yourself in this situation due to job loss or another life change. Regardless of the reason, when you can’t afford your payments, you need to work with your creditors to find a suitable payment plan.
Creating a Budget and Prioritizing Spending
First, you need to sit down and look at your budget. During this process, prioritize your bills and rank them in the order you will pay them. You need to meet your basic needs first: food, housing, utilities, and transportation costs.
After that, you need to prioritize your spending. Entertainment, vacations, and dining out should be postponed when you cannot pay your bills. Additionally, try to keep your grocery bill low. Consider replacing fresh fruits and vegetables with cheaper canned varieties, shopping during sales, and using coupons. It’s wise to adopt a basic budget and reduce spending as much as possible until you can improve your financial situation.
Determining Remaining Debt Amount
Look at the remaining amount after meeting basic needs. Compare that to the amount you owe creditors each month. If these amounts are equal, or if you have extra money after paying your debts, you are in a better position than you thought. All you have to do is stick to your budget and continue to pay your debts each month.
If you don’t have enough money each month to meet your obligations, you may need to try another strategy: further cut your budget, change your living situation (move in with family or friends or rent a cheaper place), or set up a reduced payment plan with your creditors.
Trying to Set Up a Payment Plan
If you can’t make the full monthly payment on some debts, contact your creditors and explain your situation. Ask them if they can temporarily lower or suspend payments until your financial situation improves. You might also write a letter to your creditors explaining how much you can pay them each month. Including a copy of your budget may help them see your financial situation more clearly.
These steps may not prevent damage to your credit, but they are sincere efforts to pay as much of your debt as possible. They may also help you if your creditors take any legal action against you for failing to pay your debts.
Finding Extra Money
Simply put, if you find yourself in a position where you cannot pay your bills, you need to get on top of things as quickly as possible. In addition to adjusting your lifestyle, this may also mean taking a temporary part-time job to earn the extra money needed to cover payments.
You may also need to make significant changes to the bills you owe each month. If your car payment is putting a lot of pressure on your budget, selling your car may help you catch up. Take an inventory of other items you may be able to sell and use sites like eBay or Craigslist to see if you can raise money to help cover your expenses.
Staying Current on Your Mortgage
Regardless of your financial situation, you should continue making full payments on your mortgage, even if that means not paying on credit cards. Losing your home will make your financial situation worse. If you are behind on your mortgage, you should work to catch up before worrying about the rest of your bills.
You may be able to have your mortgage payment reduced or get help with refinancing.
Other Tips for Dealing with Creditors
Be proactive: Most credit card companies and banks will not settle debts with you until you’re months behind. However, informing them of your current situation may help as they might temporarily reduce payments or lower interest rates. Be persistent yet patient: When communicating with creditors, calmly explain the situation. Being polite and respectful will be more beneficial than yelling and screaming. If you need to keep asking to speak to a manager until you talk to someone who can help your situation, do so. Stand firm: If you are receiving debt collection calls, explain your situation and your plan. If your creditors are harassing you, just hang up. This type of treatment is unacceptable, even if you are behind on your bills. Stick to your plan: While it can be frustrating not to have extra money, it’s important to stick to a strict budget until you improve your financial situation, whether by finding a new job or changing your lifestyle. Consider selling your home: If your mortgage payment is more than you can afford and the bank can’t reduce the payment, you should sell it before it goes into foreclosure. This alone can alleviate a lot of financial pressure and stress.
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Source: https://www.thebalancemoney.com/creditors-cant-pay-bills-2385871
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