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When your income suddenly decreases or disappears completely, the question quickly becomes what do you do about all those bills you're supposed to be paying? If you find yourself in such a situation, the best first step is always is to communicate with each of your creditors explaining your situation. Tell them that you are unable, not unwilling, to repay as agreed. Remember, it is always best to contact your creditors before they have to contact you.
The best way to contact your creditors is in writing; after you have written your letters:
Each utility company has its own procedure to follow before disconnecting service. The procedure generally includes notification in person, by mail, or by phone. Before shutting off service, the company may offer a budget plan to help you repay any past due amount. Remember, utility companies do not want to discontinue your service. They might even have information about available emergency funds to help you pay past bills.
Be sure to ask for help at the first sign of financial trouble. Once your utilities are disconnected, you may have to pay the past due bill in full or pay a substantial deposit to reinitiate service. You might also have to reapply for the utility and pay installation charges.
If you do not make your mortgage payments, you home could be foreclosed. Fortunately, there are many alternatives to foreclosure. For example, if you have the amount of money required bring your loan current, the mortgage company will reinstate your mortgage. You may also contact your mortgage company and work out a repayment plan.
For help, considering speaking with a HUD-certified housing counselor. If your home loan is backed by the Department of Veteran’s Affairs, call your local VA center. You can also check with your local United Way for assistance.
If you are a renter, contact your landlord about your situation immediately. The landlord may accept partial payment for one or two months. You may want to look for less expensive housing, but be realistic and remember to include moving expenses, deposits and family adjustments as you calculate costs. If it is a private landlord and you or family members are able, you may be able to do some maintenance work in place of part of your rental costs.
Car and other vehicle lenders
If you cannot make your car or other vehicle payments, they may be repossessed. Repossession means that the creditor takes the vehicle and it is sold at a public or private auction. If the vehicle is sold for less than the amount still owed on it, as is often the case, you are liable for the remainder that is owed on the vehicle.
Check with the creditor to see if the loan can be rewritten for lower monthly payments. Ask for an extension, with the extension fee attached to the end of the loan. If you do not need the vehicle, if it is a second car or a recreational vehicle, ask the creditor if you could sell the vehicle and pay the creditor off with what you receive. Also, find out about the procedure if you sold the vehicle to someone who would take over payments.
Credit card issuers
Late fees and over-the-limit charges can quickly add up to a debt problem. In addition, nonpayment could lead to your accounts being canceled and the debt may be turned over to a collection agency.
Notifying your creditors of your changed financial situation may not stop all collection activity; however, many creditors are likely to assist by waiving interest, granting extensions, or reducing payments. Do not be tempted to replace income with credit card cash advances. Available credit should be used extremely cautiously.
Do not allow insurance to lapse. Write your insurers immediately and explain your situation. Ask what payment options are available. Check with your insurance company; there may be a grace period in making payments from 10 to 30 days. Determine your minimum needs for insurance. Cancel duplicate and non-essential policies. For basic essential policies consider these options:
This is an updated version of an article that was originally published in March 2011.
listed above points are most important in order to balance life and make the payments.
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