Do’s and don’ts for when you fall behind on payments

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Ask a Lender
June 23, 2017 | Updated September 22, 2017

Key Points

Getting behind on your bills?

  • If you think you're falling behind, don't ignore the problem.
  • Address budget issues as soon as you're able.
  • Understand that most creditors want to avoid your default as much as you do.
  • If you're proactive, most creditors will work with you.
  • Avoid the cycle of going into debt as a way to get out of debt. 

One disaster can throw you off the budget rails. It’s nearly impossible to predict when your car will break down, when the fridge will give out, or when you will wind up in urgent care after a freak encounter with a moose.

Some 44 percent of U.S. adults said they could not come up with $400 to cover an unexpected expense without borrowing the money, according to a 2017 Federal Reserve study. If you already live hand to mouth, even a minor crisis can put you in the position where you can’t pay all your bills, can’t afford your car payment any more or you get behind on your mortgage.

Here are some do’s and don’ts for dealing with a debt crisis.

Don’t ignore the issue thinking it will go away

It won’t. In fact, the longer you hide from reality, the more persistent creditors become and the harder it becomes to dig out of the financial mire. So take a deep breath, open that past due bill or that flagged e-mail to understand what you’re facing.

Do design a plan of attack

Prioritize your life and the payments you need to make. Priorities should come in the form of what it takes to keep you working (or able to find a new job), such as food, shelter and transportation.

Do consider a Plan B

Another option in prioritizing: Start paying on the small bills and work your way up to the expensive ones. Statistically speaking, you’ll probably be able to pay everything but the mortgage.

Do learn the consequences on nonpayments

Different debt has different consequences when you don’t pay. Failure to pay court-ordered child support or your federal student loans for a couple of months leads to a more dire outcome than paying the credit card bill a week late, for example. Some creditors accept partial payment, others don’t. Creditors can repossess your property, garnish your wages or take you to court. Read the fine print on your bills or pick up the phone and call the creditor. This will help you come up with a tier 2 priority list for paying your bills.

Do call the nonpaid creditor(s)

Let them know what’s going on and ask for any and all options. This may include a forbearance (a temporary suspension or reduction of payments), interest-only payments or some long-term modification in payments, such as a refinance or other consolidation. If you just need a little more time and you are proactive, your creditor is more likely to work with you rather than come after you.

Don’t apply for other credit

If you’re thinking you can get a credit card to pay your other credit card bill, you know, the one you don’t have the money to pay off: Don’t do it. You’re in danger of getting into an endless cycle of nonpayments. Debt consolidation may be an option to consider, but it should be a thoughtful, planned transaction.

Don’t keep charging

If you’re already having trouble paying your bills, continuing to charge the nonessentials only makes the problem worse.

Do try to cut costs

Look at every dollar you spend, and see if there’s any place to trim the budget, even if it’s temporary so you can redirect that money toward your debt. Can you take the bus or ride a bike to work instead of driving the car? Other ideas: Cut your cable, get a lower-cost cell-phone plan, cook your own meals rather than dining out or ordering food for delivery.

A final note

Understand that the bank really does not want to repossess your car or foreclose on your house. When you fail to make payments, financial institutions lose money on that debt, and have to spend money to remind you about late payments and then pursue you for collection. That said, these organizations are businesses, and while they may give you a little leeway for a little while, don’t expect that patience to last.

Talk to an expert before you do something drastic, such as turning over the car keys, walking away from your mortgage or filing for bankruptcy. Speak to your creditors directly about default options or find a legitimate credit counselor for advice.

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