If you have lost your job, had unanticipated medical bills or simply taken on more creditors than you can afford to repay then you may be having difficulty paying the bills. Many people who are in this situation feel overwhelmed and unsure about how to proceed. While you may feel like there is nothing that you can do to help yourself, doing nothing is the worst mistake that you can make. Instead, it is important to follow the steps outlined below to minimize the damage that will be done if you can’t afford to pay your bills. Specifically, you should:
- Contact Your Creditors: the first thing that you should do is to contact the creditors that you cannot pay on time and let them know what is happening. While some creditors are more forgiving than others, many creditors will try to work with you to develop a repayment plan that meets both your needs. You may feel like you have no room to negotiate since you are the one who owes the money. However, it costs creditors money to collect on debts and it might be in the creditor’s best interest to extend the life of your loan, decrease your interest or forgive part of the principle amount of the loan. Any of these factors would decrease your monthly payment amount.
- Prioritize Your Bills: Make a list of all of your outstanding bills and prioritize them according to the consequences of not paying them on time. For example, court ordered payments, insurance bills and your mortgage or rent payments should be at the top of your list. If you do not pay your insurance bills on time then your policies will lapse. If you do not pay your housing bills on time then you may be required to move. If you do not pay court ordered payments, such as alimony or child support on time, then you may end up back in court. After those types of bills have been prioritized, your next group of bills should be any loans that you have that are secured by specific pieces of property, such as car loans. If you default on secured loans then it is relatively easy and inexpensive for your creditor to repossess the property and you could lose your car or other possession. Finally, it is important to think about your unsecured loans such as credit card loans. These creditors are often most willing to work with you because it is expensive and time consuming for them to collect on their debts and they want to keep you from entering bankruptcy where they are less likely to recover their money.
- Make Written Agreements with Your Creditors: Enter a written agreement with any creditor who is willing to negotiate with you. These agreements, if properly executed will likely be enforceable in court.
- Seek the Advice of a Bankruptcy Attorney: If the above tactics do not work and you are considering filing for bankruptcy then you should contact a bankruptcy attorney who can advise you about the benefits and consequences of bankruptcy and other methods of managing your debts.
Above all else, remember to take control and figure out a solution to your problem. Do not ignore your bills or your creditors. Instead, try to renegotiate the terms of your loans and prioritize your loans so that you have a manageable plan to get back on the right financial track.
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