What if You Can’t Pay Your Bills?

by Jessica Sommerfield · 0 comments

Recent headlines have brought to light a new crisis in the bankruptcy troubles of the Motor City: thousands of homes are facing water service shut off. The city’s water and sewer department account for nearly 1/3 of the city’s debt, and the shut-offs are part of an effort to reconcile some of their financial troubles during the transition to privately-owned services. While this action drives many residents to fork out the money for their delinquent water bills, many others are still unable to pay their bills and simply go without this basic utility. In turn, human-rights organizations are stewing, because many of the shut-off homes include families with young children or elderly retirees who are at risk.

Thankfully, I’ve only had to let my bills go late a few times when we were going through a rough time financially. As someone who prides herself in being on time, above-board, and boasting an excellent credit score, that’s hard to do. But sometimes you simply don’t have any other options. With the understanding that these situations happen in spite of everything you may have done ‘right,’ there are ways you can handle them in order to survive and get yourself back on track with as little damage to your credit score as possible.

What to Pay If At All Possible
Some bills you can afford to let slide, but there are certain ones you should make a priority. These include your mortgage or rent, car payment, and utilities (if at risk of a shutoff). Basically, you should be most concerned about staying current on any bills tied to a physical asset such as a home or vehicle. Mortgage companies can start foreclosure proceedings on your home as early as one late payment. The further along you allow foreclosure proceedings, the more fees you’ll pay to reverse the process. Speaking with your lender as soon as you anticipate a problem is the best strategy, because they’ll be able to give you a number of options other than foreclosure or ruining your credit. If it looks like your financial situation will be long-term and you can no longer afford your house payment, consider putting it up for sale. Even if you take a loss, it could be a better financial decision than foreclosure or bankruptcy.

If you can’t pay your rent in full when it’s due, make a deal with your landlord right away. They may allow you to make a partial payment or use your security deposit. If you live in a complex, they might let you work off some of your payment by landscaping or cleaning.

Automobile lenders are notoriously unforgiving when it comes to late payments. Again, it’s best to dialogue with your lender as soon as you anticipate difficulty with your payment. In most cases, they’re willing to take some payment rather than no payment. Of course, another option is to sell your car if you can’t afford it or don’t really need it.

What You Can Afford to Let Slide
While they are certainly financial consequences in doing so, credit card bills, personal loans, student loans, and taxes fall into the category of payments you can usually afford to let slide the longest before you’ll suffer collections or major damage to your credit. Don’t take this for granted, though. Continue to dialogue with any lender you can’t afford to pay and negotiate whenever possible, but avoid the temptation to simply give in to the creditor that harasses you the most. Always do what’s best for your long-term finances.

Being behind on bills is never a desirable financial situation, but it happens. Knowing how to handle it in a way that is the least damaging to your daily needs and financial credibility is the key to surviving and thriving through these difficult times.

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