With the current economic situation, many people are having difficulty paying their bills. Banks, mortgage companies and lenders will often work with you to allow you time to get back on your feet financially.
One of my creditors cut the interest rate drastically and the payments in more than half for 6 months to help keep the account from going into collections. While all creditors might not be willing to take the same steps, it is worth giving them a call.
The following is a list of things to do if you can’t pay your bills.
- Make a simple budget. Figure out your income and list your debts with the total amount due, your monthly payment and your interest rate. Write them down with the highest balance and payment to the lowest. Determine what percentage you need to take off of each bill to be able to make the payments. You will need to know what you can afford to pay when you talk to each creditor.
- Write down a paragraph or two detailing your circumstances. Include why you are currently unable to meet your obligations and when you believe you will be able to resume payments. Organizing your thoughts will make it easier to talk to the creditor and you may need to send it to them in writing.
- Determine the priority of each debt. Secured loans usually are a higher priority as you will not want your home to go into foreclosure. Call the highest priority debts first. You may have to accept a higher payment on these and you will want to know what you have left to work with when calling the other creditors.
- Call each creditor and explain the circumstances of why you are unable to meet the obligations. Don’t put this off until you are months into default, creditors are more likely to work with you before you go months into default.
- Ask if they offer a hardship plan. A hardship plan can be many different things. They will often reduce the interest rate and lower the payments or they will allow you to make partial payments and tack the remaining balance onto the end of the loan. If they offer a hardship plan, determine if this falls into the amount that you will be able to pay from your budget list.
- If you cannot meet the plan they offer, tell them what you can afford to pay. Offer to send them your budget and circumstances in the mail or by fax. This may not be resolved in the first phone call as the person whom you are speaking with may not have the authority to make this decision. Ask them if they do and if not ask to speak with someone who would have authority to negotiate a plan.
- If they will not negotiate a payment reduction or will not lower your payment to an amount you can afford, leave the door open for further negotiations if possible and move on to the next creditor on the list.
- Get it in writing. If they offer a plan, ask them to send you the offer in writing. You will want to keep it in your records so that there is no question of the terms.
- Before you agree, make sure that you can meet the payments. Most plans will require you to make the payments on time or it will revert to the original amounts which will land you right back where you started and the creditor will be a lot less likely to negotiate the second time around.
- Keep a running total of the amounts that you agree to pay. This will either give you more or less leeway when negotiating with the next creditor on the list. While your goal is to get all of your bills reduced by a certain percentage, you will probably be more successful with some than others and you need to make sure that the total amount you agree to pay is within your budget.
The most important thing is to do these things as soon as you know you have a problem paying your bills. Even if you think that you will be better able to pay or catch them up in the very near future, make payment arrangements early. It will be easier to deal with the creditors if you are proactive and you will not only save your credit rating but you also might save your house.
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