NDSU Extension Service - Ramsey County

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When You Can't Pay the Bills

When You Can’t Pay the Bills

 

          After income drops and paying bills becomes difficult, communicating with creditors is often just the opposite of what most consumers want to do.  Mail from creditors is often left unopened and telephone calls are avoided as if this will make the bills go away.

          Being proactive though and being the one to initiate communication with creditors can alleviate a great deal of stress and uncertainty. Start with assessing your financial situation.

          Assessing your situation means that you determine the following:

- How much income you can count on each month

- How much is needed to pay for essential living expenses (food, shelter, utilities, clothing, transportation and insurance)

- To whom money is owed and how much

- How much you can afford to pay each creditor and

- When you can make the payments

          When you call your creditors, explain your situation and ask their help to work out a solution. Be prepared to explain calmly why you cannot or have not made regular payments, your current reduced income and prospects for future income, other debt obligations and your plans to keep current, and the amount you will pay each month.

          Many businesses such as home mortgage lenders, utility companies, auto lenders, the IRS, student loan lenders, medical service providers and secured loan lenders have programs for consumers having difficulty making payments.

          Keep a record of the name and title of the person you talk with and the name of the company or collection agency and their mailing address. Then, follow up with a letter summarizing your agreement. Keep a copy of your correspondence.

          What good will any of this will do?  The lender may suggest a reduction in your monthly payment, a reduction or dropping of late fees, refinancing the loan to a lower interest rate, paying interest only until regular payments can resume, deferring payments for a short time or give you permission to sell the item and use the cash to repay or partially repay the debt.

          Not all creditors will accept alternative payment plans, but they are more likely to work with you if you contact them first.

 

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