What To Do If You Can't Pay Your Bills
99Many people are caught in a bad cycle of robbing Peter to pay Paul. They borrow money each month from one source in order to pay the minimum payments on other items. Or they use the cash they have to pay the minimum payments, and put all living expenses on the credit cards. At some point, something will usually happen that will cause the plan to come crashing down. So what do you do when you can't pay your bills?
The first thing to do is to stop spending money. You have to break the cycle at some point. Stop spending money and stop using the credit cards. Yes this will be hard; you will have to make some very tough decisions in the beginning. Make do with exactly what you already have for a few days while you sort through the mess.
Second write down every bill that comes into your house each month. Every debt you owe, every utility bill, etc. - write everything down. On one paper write down the basics that need to be covered each month - mortgage/rent, electric, heat, and water. These are absolutely necessary. There might be ways to reduce some of these later, but for now, these have to be paid every month, first. On another piece of paper list all the other bills that are either debt payments or are optional things (cable for instance). Write down the full debt owed, the interest rate and the minimum payment.
Once you have your bills written down, you need to decide on some other amounts. Obviously you need to eat every month. I am not talking steaks or Burger King here; I am talking the basics, the cheap stuff. You are in a desperate situation and you need to make some tough choices. In the beginning try to eat only what you have in the house for awhile while you get caught up on your bills. You do need to plan for food and gasoline purchases though, so decide on a minimum amount that you need for those each month and put them on the first piece of paper.
Now you have to decide the order in which to pay your bills, because if your world has come crashing down, then you probably don't have the money to pay them all. Everything on the first paper gets paid first. Everything on the second paper gets paid last. If you find out that by slashing your budget you can afford to make minimum payments on all of your debt that is great. You then have to decide on the correct order.
There are several ways to do that. You can pick the debt with the largest interest rate and pay it first or the debt with the highest balance and pay it first. I prefer to pay off the smallest debts first though. That might seem odd, but you will gain some traction very quickly this way. By putting extra towards the smallest debt first it will most likely be paid off quickly and you will have money freed up in your budget.
What if you can't make a minimum payment on all of your debts? It is time to talk to the companies. If you have student loans you can see about getting them put into forebearance, which will usually allow you to take some time off from the payments (interest will accrue though). If you have credit card debt I would first call each company and ask for an interest rate reduction. Your best chance at this is before you are actually late on a payment. If you can get your interest rate reduced, then chances are your minimum payment will go down some and you might be able to afford it. If you can't get a lower interest rate and you can't make the payments, then you need to be upfront with them and work out a payment plan. Usually the account will be frozen at this point so that you can't charge anything else.
Some companies will be unwilling to work with you though. If you can't pay all of your bills, credit cards should be the last thing that does get paid because it is unsecured debt. Other types of debt are secured with something like a car and the company can come take it if you don't pay. So if you have to choose, pick an unsecured debt to not pay. I am not advocating that you don't repay your debt though, eventually you will have to pay them back, with interest and fees, but we are talking desperate times and trying to get back on track, so for awhile you might have to stop paying on some debts.
I haven't mentioned cars and car loans yet. These are tricky. Some people really need there car and have to have the loan to pay for it. You have to evaluate your situation. If you make $20,000 a year and have a $500 per month car payment, you need to sell the car ASAP because there is no way you can sustain that payment. If you have three cars, all with payments, sell one. If you have access to good public transportation seriously consider selling a vehicle. Desperate times call for drastic measures and everything needs to come up for reconsideration. You have to make changes and selling a car might be one of them that has to happen.
Once you have a budget in place and a plan for repaying your debt you need to figure out a way to make some extra money so that you can dig yourself out of this hole you find yourself in. Chances are good that you have been overspending. On what? Can you sell any of that now? Is there anything that you haven't even used yet that you could return? I would sell anything extra that you can find. I would try to bring in any extra income you could to get back on your feet.
If you do all of these things, the chances are good that you will be able to get your financial house back in order fairly quickly. Once you are back to being able to pay at least the minimum on all your bills it is time to work through a debt snowball and get everything paid off as quickly as possible. If you can make the hard decisions immediately and make some changes to help you will be able to stop the bad cycle you have found yourself in. You are making some lifestyle changes here and if you can stick with the plan then it won't be long before you will be doing great financially.
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Sound advice, Jennifer. No one likes to make the hard decisions.
That helpful for me. Great advice Thanks a lot.
Excellent hub, and useful advice for living in economic woe. Thanks for sharing.
I think that is a very stupid thing to put on this web sight first thing you know stop spending . I dont spend at all but on things needed . I have never even taken a vacation. I dont smoke or drink very rarely even rent a movie or eat out maybe 2 times a month if that I dont leave my house on the weekends so I dont use gas , and my husband the same. My husband got laid off in Nov and wnt back the first of March .We have struggled and not spending does not mattter we could never depend on the unemployment they only sent him money on a card 3 times the whole time he was off. Even still the bills have to be paid personally I'd like to put the blame on unemployment. But the fact is know one cares about people like us we have no kids and never get anything back in taxes to help pay anything off. Anyway I know that I do not spend more than I need to!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
What To Do If You Cant Pay Your Bills
Great job on this hub. I'll be visiting often to view your others.
Great hub. I never think in this way. I used to borrow and pay back, that what i did. Thnx for sharing this...
I believe that YOU are Great !
Sound advice. Some people are at the point where there is little to do. I've been laid off since Nov. and unemployment is all I take in, I'm slowly losing everything.
Jennifer, I love your comment "Is there anything that you haven't even used yet that you could return?" When I was once helping a friend get out of debt, I suggested they return their $214.00 office chair they recently bought for their home office (which they did). I then brought them to a garage sale where we found one for $5.00.
Jennifer this is good advice for someone not too far under water. But I advocate not paying cards at all, if it won't affect a job, for those seriously under water. That may or may not require bankruptcy, but my way is a protest more than a way to protect the credit score. I figure if everyone walks away now the system will implode and we won't have the banks ruling us anymore. They are stealing our taxpayer money through tarp and PPIP and cheap loans from the government while they raise my credit card rates. That is against common decency. They are scumbags IMO. I have links to my good hubpage articles and more at dontpaycreditcards dot com. :)))
Try to avoid the loan that you can't pay it back.
Jennifer, great hub. I'll prob link to this from a new hub I plan to publish pretty soon if that's alright with you.
Re: Debbie's comment. I agree with you 100%, how ridiculous to tell someone to stop spending when paying for gas and groceries is an issue. I am not married, have never had kids, yet I pay high taxes, no tax break for kids, the politicians only care about people who are married and have kids, they never are concerned with a person who lives alone and still has to have the same utilities as multi-working families. They have more money coming in and get all the breaks. I
I disagree with what you are saying, Fern and Debbie. It is all relative to your situation. Of course you feel that you are the ones being most taken advantage of . . . I would wager a bet that so do all the two person families who have children and had spouses laid off in the past year. Nobody who is struggling is enjoying the economic times but there are people out there who are not making good decisions. Kudos to you if you are already taking care to control what and where you spend your money but there are those who are not. I know several people who are taking their kids for happy meals once a week while complaining about their growing debt. Lots of people don't think about how the small purchases add up over the course of a month. So, in my opinion, Jennifer's advice is exactly what someone (perhaps not you) out there has been needing to hear.
This is wonderful advice, but it is for someone with not more than 5000.00 in credit card debt. Once you are in too far, you will have to take more drastic measures to get out of debt. The only real solution is the government getting involved and keeping those interest rates reasonable. If you are paying over 25 % interest on a card, your goose is probably cooked!
The best thing is NOT to get into credit card debt to begin with. Shred all those incoming credit card offers. Have just one card with a small limit.
Figure out how much something is REALLY going to cost after the interest you pay with the credit card. This will make you think twice. That awesome dress you got for sale at Victoria's Secret does not look so awesome with 25% interest tacked on if for 5 years. You will be floored when you figure out what you really pay with credit cards.
The only way to sanely use a credit card is to pay it off every month. That's what the rich people do, the people who could pay cash anyhow. I know...it is not fair, but life really IS NOT fair...get used to it and stop being a victim.
Learn to live within your means, say this over and over and if that means a trip to Wal-Mart or Goodwill, then so be it.
BTW- Check out my new hub, "How To Legally Not Pay Your Credit Cards Without Going Bankrupt"
And...I agree with you Bgamall....I think we should all stop paying our credit cards. Have a credit card revolt! These companies are nothing but legal crooks! Its a joke, they should be thrown in jail, and the baracuda marketing techniques should be totally outlawed. So many people are in such deep debt....this is by design, this did not just happenby accident or because people are irresponsible.
Great article. Very helpful.
great hub and some very helpful tips... its so easy to piddle away a few bucks here and there and not realize how much it adds up...
Nice hub, I agree with paying the lowest balances first. You actually feel like you are getting somewhere when you pay one of those off. You can see that you are making a difference on your debts. Nice work.
Useful hub with score 95. Great. The worth related article http://hubpages.com/hub/Get-Out-of-Debt-Faster
You did a really helpful hub. Well done!
This is a really helpful and caring hub that I am sure has helped many.
Nice idea! Helpful Hub.
Thank you.
Encouraging and sensible article. Divide and conquer. That's a great way to approach an overwhelming situation.
The discussion on receiving tax breaks for kids is ridiculous. It really does not help many at all. Kids are expensive with one friend telling me he can directly relate $1,000 a month to his kids general care (not toys and junk). The tax break he receives is really not that much in comparison.
I really like this article , and I think what you trying to get over to people is that if they want to really get out of debt, there are sacrifices that MUST BE MADE! Great article
I have $726/month payments on two unsecured loans that I got when I was making a good deal more money that I am going to have to negotiate. I spoke to one today and am in the process of getting on hardship. I'm going to talk to the other one later today. I just can't make my payments but I want to pay my debts. I'll be fine if they will cut the payments in half and let me pay twice as long. I can't keep going this way. They are basically the same as credit cards. If they went away I'd be fine but I don't have the cash to pay them off or any way to get any money to pay them off. I've aready sold my guns and motorcycle. Those were the only things I had that I didn't owe money on. Sometimes it is hard for me to think about how much better off I was last year.
So, what you wrote is useful to an extent.....but what would you do if you had a thriving small family-operated business, then one day it all came crashing down and you had to walk away empty handed with over $400,000 debt. My story goes a bit further than yours. You still have hope! I went from $320,000 a year to ZERO. And still an ongoing desperate search for the answer.
Great Advice. One problem Two Lost Jobs, No income. Call charities and Church's, United Way, Salvation Army, 700 Club. If you partner with any of them that does help. Fortunate I do partner with a couple of them Thank God. Our church does not have benevolent funds. They support Lovinglink.com and other charities. (most are out of funds in one day) They have to divide up between thousands. Pray allot and Trust God. Do not give up. He will help you. Just believe him.Most organizations have little if any to spare but someone will come through. God knows the right person, place or thing for you Miss Cue. I was in hospital for 4 days almost left this earth but a miracle the bowell obstruction dissaperared. True story. I know God is going to provide rent, car, heat. Trust him. If you do not know him now is the time. He loves you. He will provide a way. He always comes through with someone willing to help with love and no expectations. The state, and other organizations are low of funds here but there is one that does not fail. God. So for those like me that have nothing to sacrifice or stash Go to Gods word. He will direct your path. With Love. Beyond my wildest dreams he provided last month and I am believing for this month. Calling creditors helps but does not keep the phone on for long or the electric. Thank you for your friendly pointers. If you have nothing to budget and payments that is a big Ouch. I guess another hub in and of itself may be good. I may write one, I am there. As for Miss Cue, the crash came down. I can relate. You will be OK. Make calls and believe God.
Sacrifice is easy when you have nothing to sacrifice.
Something will come through for you. Keep calling and sharing with organizations something will come up for you.
PS It is cheaper to eat at Wendys for $2.00 to $3.00 for two, then going to the grocery store for mac and cheese for two.
Great advice and a very timely one. I will send this to some friends who are dealing with debts and loss of income. Thanks!
The reality of a situation when you can not pay your bills is this... like it or not. Pay the mortgage, buy the food, pay the utilities. Unsecured debt should not be paid off at all until you can cover the others. To give money to the credit card companies is a waste of resource. You may never catch up. The interest you pay on minimum payments will simply keep you forever indebted. Now I am not suggesting everyone be an intentional deadbeat... I am saying if you are pressed into a corner the credit cards are the LAST thing you should pay. And you should call the companies and explain your situation. Many will suspend interest in lieu of a payment plan to get you back on track. Debt consolidation is a bad idea because it's just a guise for profit. Seriously if the Federal Government can hand out $3.5 billion to American Express while they continue to pay their CEO in excess of $40 million a year, and then charge customers 27% plus late fees... you have to really wonder if what you owe them can't wait a bit. I am not just singling them out... many other banks are doing the same thing, I just know about this because I was so appalled at what their CEO was making while they were supposedly losing money. http://hubpages.com/hub/CEO-Wealth-Facts-The-Riche
There has got to be some rationality injected into our system of Capitalism or the crash will be here very soon. A country can not sustain debt for an unlimited length of time. CEO compensation has got to be capped at a multiple of the lowest paid employee to put some equity in the workplace and get people back to work.
Rough situation to be in. I have quit buying frivolous things like subs from subway, starbucks coffee etc. I also havent bought clothes in a long time.
I have a simple solution if you can't pay your bills. Just walk away from them. The banks brought the housing scam to US shores with the assistance of the Fed who looked the other way. This ponzi scam then ruined credit cards and banks who borrow at 1/2 percent lend at 20 percent. It is time to stomp these dishonest financial institutions in the mouth. I don't mean physical violence. Change your phone number and walk away from unsecured debt. Don't let them get to you.
I agree with MikeNV in his post above. There are more important things in life for most of us than a credit score. Try survival as one.
LondonGirl says:
9 months ago
useful advice. Panicking doesn't help - budgeting does. I do some voluntary work with people in serious debt problems, and so many of them just don't want to see the problems.