What to do if you cannot Pay your Bills on Time

If you just lost your good paying job, and now have to make it on half that amount or less in unemployment insurance and have lots of debt, a mortgage, car loan, credit cards, student loans and don’t wish to file for bankruptcy, then here are some things to think about.

If you know you will not be able to pay your bills, then don’t ignore it and just bury your head in the sand. First and foremost, cut your spending, if you no longer have a six digit income don’t live like you do. Don’t buy new clothes, and forget about the new smartphone5 that just came out. Cut off cable TV, change your cell phone plan, discontinue that extra land line telephone that you only keep because you’ve had it for years and grandma calls you on it, or maybe grandma will pay the bill for you. Do the children really need smartphones and an unlimited data plan? Keep your internet access and a basic cellphone, you will need these to find a job and to pacify creditors.

Look for other sources of income. Go online and see if you qualify for food stamps, these can be worth hundreds of dollars a month. There is a lot of contract work available online for writers, editors, programmers, accounting, and data entry. This site has many work at home leads. If you think you can write but haven’t tried it, then check out this site.

If you have the skills to get another good paying job, then get your resume posted on job-sites, join LinkedIn, use the internet to sell yourself. If you don’t have the skills think about getting them, go back to college, get that degree you’ve always wanted, apply for grants and government backed student loans. There are several well known universities that offer free courses including MIT. Learning is never a bad idea. 

Now that you have cut your expenses to the bone and you still can’t pay your bills it’s time to think about which bills you are going to pay. And how much damage your credit score is going to suffer. Skipping the rent can leave you on the streets in a month or less. Turn down the heat, unplug the TV and other electric vampires. You can probably pay a little less than the amount owed on the electric bill or phone bill, but if your personal recession lasts more than a few months this could come back to bite you.

Any late payment can affect your credit score. Mortgage lenders may work with you in reducing or skipping payments, call them before you are 30 days late and see what they can do for you. Ask them how this will affect your credit score. They would much rather get their money with a slight delay than go through lengthy foreclosure and take a huge loss. And keeping a roof over your head is a good thing. Second mortgage holders can’t foreclose if you are current on the first mortgage, but read the fine print.

Car loans are secured by the car. And car lenders can be pretty quick to call the note. The process for seizing a car is different than for your primary residence. Once you are even a day late, the repo man can take it and once he has it, it is no longer yours. Breaking into your garage to repo a car is considered an illegal repossession, if this happens get some pictures and call the police and get a lawyer. Breaking and entering is a crime. But if the car is on the street or the grocery store parking lot it’s fair game, if the repo man can find it, then he can take it. 

Credit cards are unsecured debt. The creditors have nothing to foreclose on. After the bills are a few months late they will be turned over to collections. Think about debt consolidation loans, if you can make the payments. If you have money in a retirement account or other sources think about cutting a settlement with the lender. Part of your settlement should be what will be included on your credit report.

Government backed student loans are the easiest to get forbearance for, modification, or deferment on skipped payments. Call your lender, talk to them, do not avoid them. These loans can also be rehabilitated with some on-time payments. It is very difficult to go bankrupt on a government backed student loan. 

Get familiar with the Federal Fair Credit Reporting Act, know your rights. You can buy some time on a debt by sending them a letter saying, “I dispute the amount owed and I need a full accounting of all transactions, interest and fees.”  Instead of appearing on your credit report as delinquent, it will appear as in dispute until the lender complies. Failure of the creditor to comply will leave them in violation of the above mentioned act.